Orders of the Day

Co-operatives and Community Benefit Societies Bill

Order for Second Reading read.

Keith Simpson: On a point of order, Mr. Speaker. Have you been advised whether any Minister, possibly the Deputy Prime Minister, is going to come to the House at 11 o'clock and make a statement about the inability of the Government and local government to respond to the recent extreme weather conditions? Nobody can legislate for the weather conditions, but a creaking, broken-down transportation system, which is not working, has literally been brought to a halt on the roads, rail, underground and at our major airports, and it is a disgrace. Labour is not working, nor is the country. Is the Deputy Prime Minister coming to the House?

Mr. Speaker: No Minister has approached me this morning.

Mark Todd: I beg to move, That the Bill be now read a Second time.
	Attendance in the Chamber may have been inflated by the weather conditions, but I hope that it is because of enthusiasm for the Bill. I begin by declaring the assistance that I have received from the Co-operative party and its advisers. I have chosen to promote this Bill, in part, because I served as a director of the then Cambridge and district co-operative society between 1987 and 1990. There are other Members in the Chamber who have had experience of that society. I have been a member of various societies, including those that served my constituency for many years.
	Co-operatives and community benefit societies have their roots in the self-help tradition of the Victoria era. Their origin dates in part from the beginning of company law in this country and the incorporation of legal bodies, which first became possible with the establishment of joint stock companies in 1844. Incorporation allows an organisation its own legal personality. It can sue and be sued, own property, enter into contracts and enjoy the privileges of limited liability. As we all know, the company is the commonest form of incorporated body. The number of registered companies runs to many millions, more than 1 million of which are currently trading. The company continues to be a highly effective means of attracting investment, generating rewards for entrepreneurs and for those who are prepared to take risks with their capital, and will rightly continue to play the dominant role in the development of our economy.
	The advantages of the company are reflected in the registration figures for various forms of organisation. Each year, over 200,000 companies limited by shares are established; about 6,000 charities; over 5,000 companies limited by guarantee, a common charity model; but only 200 industrial and provident societies are registered in any one year. When the company was emerging, different legal forms of business ownership were emerging to meet other needs. The co-operative society emerged as a trading vehicle through which people could meet their basic requirements to buy food at a fair price. Their purpose was first established and protected in law in 1852. The preamble to the Industrial and Provident Societies Partnership Act 1852 notes:
	"Associations of Working Men have been formed for the mutual Relief, Maintenance, Education and Endowment of the Members, their Husbands, Wives, Children or Kindred, and for procuring to them Food, Lodging, Clothing and other Necessaries by exercising or carrying on in common their respective Trades or Handicrafts."
	Building societies emerged at the same time as a vehicle to help those who lacked the means to purchase their own home. Friendly and provident societies were also established at that time to offer mutual insurance against sickness or unemployment.
	All those organisations, together with trade unions, were established on the principles of self-help and democracy—still novel in a world where hierarchy, patronage and either benevolent charity or exploitation were the means of control and service provision for working people. Since then, those principles have remained relevant and been applied by our citizens to found organisations relevant to almost every part of our economic and social life.
	Co-operatives and community benefit societies are incorporated under the Industrial and Provident Societies Act 1965, which consolidated various changes since 1852. While company, building society and friendly society law has changed substantially in the past 150 years, with the exception of certain consolidating statutes and specific narrow issues, industrial and provident society law had not, until last year, changed fundamentally since 1862.
	Fascinating and inspiring as the history of the co-operative and mutual sector is, it is important that we should not just simply admire the sepia images or the marvellous examples of surviving organisations. Mutualism has a robust future, relevant to the lives of all our constituents. If we reflect on the themes that inspired the brave, imaginative founders of those societies, we can see that they are just as central now—a desire for more control of our lives; recognition that membership and involvement can add quality to service; and acceptance that services for a community can be best managed by that community.
	As one author considering the role of mutuals in the future has written:
	"One of the most important issues facing the Government at present"—
	he referred to this Government—
	"concerns the appropriate mechanism for delivering public services. In the UK we have moved from transport and utilities services owned by private enterprise, through nationalisation to state-owned and controlled services; and then back again in a number of areas to privately-owned services with a state-appointed regulator. The latter has not been an overwhelming success"—
	nor were some of the former experiences—
	"and there are those who believe that further transition is necessary. A move to a community-based form of ownership is one possibility."
	I have on another occasion in the House reflected on what seems to me to be a conundrum. As some hon. Members know, my grandfather was a Member of the House in the 1930s. At that time, few would have expected Governments to provide administrative or legislative solutions to all their problems. If my father's recollection is anything to go by, an MP's caseload was tiny, yet respect for the work that Parliament did, for Government institutions and for politics appears to have been immeasurably greater than it is now. Yet now Governments seek, at the request of citizens, to intervene more and more. The more laws we pass and the more institutions we establish to solve perceived problems, the less our efforts are regarded.
	When I reflected on the subject of this Bill, I was approached, as one can imagine, by many organisations wishing to pass laws that would restrict other people's freedoms in various respects, often for sound reasons. However, I firmly wished to see a measure in my name that permitted people to do something that they are currently not able safely to do. That was my choice in the matter, and I shall expand a little further on that point.
	There are many possible explanations for the conundrum that the more we do, the less we are regarded, and the more the state provides, the more suspicion in which the state is held. It is not appropriate for me to dwell on that now, but one part is touched on in the foregoing quotation, which rightly reflects the disengagement of most citizens from state-owned or controlled services. Transferring ownership and control to the community served by the service can add quality to the service itself, by improving its reflection of user needs, and strengthening the value that the community places on that service.
	There are suggestions that the Government may be prepared to entertain such ideas for their reform of public services. It is partly for that reason that I am promoting the Bill, as it will, as I shall outline, remove one weakness in the current model of ownership and control of community benefit societies, a possible vehicle for public sector management reform.
	The out-of-date framework for industrial and provident societies is recognised in the Government's excellent strategy unit report, "Private Action, Public Benefit", which was issued last autumn. It remarks:
	"Industrial and Provident Society legislation has not kept pace with changes to company law. A fundamental overhaul of the structure is long overdue."
	Last year my hon. Friend the Member for Harrow, West (Mr. Thomas) promoted a Bill with that aim, and I pay him great credit for his efforts. The measures in this Bill were contained in the Bill last year and were the subject of considerable debate at the time. They were deferred, partly because of the need to consider further their possible impact. My hon. Friend's Bill, which became the Industrial and Provident Societies Act 2002, was the first update of industrial and provident societies legislation since 1965. In summary, it gave the same level of protection from carpetbaggers as exists for building societies, and allowed future changes to company law to be applied to industrial and provident societies by means of a statutory instrument. My hon. Friend's Bill was much needed, but there remain a number of outstanding issues, which this Bill, in part, seeks to address.
	Although they are covered by the same legislation, there are some major differences between co-operatives and community benefit societies. A co-operative conducts its business in the interests of its members, who gain from it on the basis of how much they use the service or its trade, rather than purely on the basis of their investment in it. If people want to register a new co-operative society, they have to satisfy the Financial Services Authority that the proposed organisation is a bona fide co-operative. Many retail and agricultural organisations and many social clubs are designed as co-operatives.
	In my constituency there are successful retail outlets owned by two societies, Midlands co-operative society and Tamworth co-operative society. They offer a range of convenience, non-food and funeral businesses from Chellaston on the edge of Derby to Swadlincote in the south. My one regret is that the range has diminished over the years, as has been common in several parts of the country. The most recent example was the closure of the store serving the village of Hilton. The village in which I live, Willington, has an excellent Co-op convenience store, which my family uses regularly.
	The retail co-operative movement makes up a significant part of the UK economy. Retail co-ops alone have an annual turnover of £9.7 billion and employ 115,000 staff. They operate for the benefit of their 9.7 million members throughout the UK.
	Community benefit societies are the second category of industrial and provident society. They differ from co-operatives in that they trade for the benefit of a wider community, rather than just their own members. Their name is often abbreviated to bencoms, and I shall use that term. They include the many housing associations that exist, but I should explain that housing associations have greater protection than other community benefit societies because the Housing Corporation oversees their activities. Community benefit societies also include some social clubs—I remember some entertaining exchanges last year about some of the social clubs that had been established, including Conservative clubs in some parts of the country—and the new football supporters trusts.
	Many South Derbyshire people support Derby County. There is a football trust for supporters of the club, set up as a community benefit society with the aim of strengthening links with the club and adding weight to the voice of supporters. In other parts of the country, such societies have been able to share in the ownership of clubs. If we reflect on the origins of the industrial and provident society movement—a desire on the part of ordinary people to have more control over their lives and to rely less on the decisions of a wealthy few—we can see its attractions in the football world.

Gareth Thomas: My hon. Friend mentioned football. Will he also pay tribute to rugby clubs that use the industrial and provident society model—such as the Pinner and Grammarians rugby club based in my constituency—and the many industrial and provident societies that are affiliated as rugby clubs to the Welsh rugby union? Does he share my hope that those rugby clubs will soon produce again the players to help Wales rightly challenge and win the six-nations championship?

Mark Todd: Until my hon. Friend's final sentence, I would have agreed with him entirely. As hon. Members can imagine, with my build I was a pretty competent rugby player in my day, and I am a keen supporter now. I am delighted to see the industrial and provident society model being used by rugby clubs across the country, including the one in my hon. Friend's constituency. I congratulate him on the assumed association that he has with those clubs.
	Industrial and provident societies give legal form, and thus structure and clarity, to a range of community organisations and activities for which charitable structures, public sector structures and the company model are not entirely appropriate. A key attraction of the industrial and provident society is the element of democracy. Where a number of people are involved or are dependent as customers on the service or trade of the organisation, the one member, one vote principle that the industrial and provident society offers, and where it differs most markedly from a shareholding operation, presents a powerful attraction. It is an arrangement by which power and control cannot be bought for money. Where a local community has been involved in creating or protecting an important community facility, the one member, one vote governance route helps to reflect the effort that all those involved have put in, and their mutual dependence on one another. Industrial and provident societies that are members of the excellent Village Retail Services Association, which helps to keep rural post offices and shopping facilities available to communities, are good examples.
	A similar form of democracy can be created in a company. Indeed, some co-operatives have even decided to use the company model. I do not criticise that approach, but the problem is that nothing can stop shareholders changing or abandoning the original purpose for which the company was set up.
	Another key difference between the industrial and provident society and the company model is the approach of the different registration bodies. Under the Industrial and Provident Societies Act 1965, the Financial Services Authority has to approve any changes to the constitution of an industrial and provident society, and it strictly monitors such changes to ensure that they are in line with the registered purposes of the society. That clearly offers added reassurance to members. Companies House, by contrast, has no such function. It has a lighter touch—and rightly so—but with the result that shareholders or members of a company can change that company's constitution more easily. Companies House does not scrutinise constitutional changes to companies. Such scrutiny is not needed as there is no equivalent to section 1 of the 1965 Act in company law.
	Those key differences create important distinctions between the company model and the industrial and provident society model, and they provide choice for those looking for the right legal structure to suit their purpose. A variety of structures give legal expression to the activities and services of organisations rooted in our communities, reflecting the many differences in their motivations, modus operandi, financing, governance and so on. I am not seeking to say that either the co-operative or community benefit route represents the best legal structure for every situation. For some scenarios, the approach would be entirely inappropriate, but our legal structures need to be appropriate for the circumstances to which they are applied.
	One type of organisation that has been particularly attracted to the co-operative and community benefit society models is local registered clubs. There are 6,500 registered clubs in the UK, many of which have chosen to be co-operatives or community benefit societies. Examples include clubs of the Royal British Legion, the Association of Conservative Clubs, the National Union of Labour and Socialist Clubs, the National Union of Liberal Clubs, the Royal Naval Association and the Royal Air Forces Association.

Andrew Love: Does my hon. Friend recognise that any organisational form that can bring together Conservative societies and working men's and socialist clubs must have something very special about it?

Mark Todd: Indeed. My hon. Friend highlights the fact that this has never been a partisan issue, as was demonstrated in last year's debate. It is a model that can be applied in a wide range of circumstances when it is convenient for particular bodies to incorporate themselves so as to protect the interests of the original purpose for which they were set up.

John Bercow: As the hon. Member for Edmonton (Mr. Love) implied, the hon. Gentleman is offering us a heady cocktail. Will he now tell the House something about the diverse range of purposes for which members will allocate surpluses?

Mark Todd: If I may, I shall not deal with that point now, as I have some way to go. In dealing with the clauses, I shall come to the issue of how to deal with assets should they be dissolved for some purpose.

David Cairns: One of the first things I was asked to do when I was elected as a councillor some years ago was to intervene with the local Conservative association, whose club was being closed owing to lack of interest. Tragically, it was one of those things that history leaves behind. Would the Bill have allowed me to intervene more strongly to prevent the people who were running the Conservative club from flogging it off altogether, even though nobody was using it and there was absolutely no interest in it?

Mark Todd: I thank my hon. Friend for that intervention, which I am sure contained no political message in respect of the Conservative cause in his constituency. If the Bill had been enacted and the society had held a democratic vote and was seeking to protect its value, it would have had more difficulty in disposing of that value, except for the purpose for which it was set up. Of course, in the case to which he refers, the purpose for which the club was set up was presumably either the promotion of the Conservative cause or another associated purpose.
	As hon. Members know, a company is a vehicle for generating profits for its shareholders, and the ability to distribute the profits generated from its trade is fundamental to its nature. Co-operative societies and bencoms, however, are set up not as vehicles to generate profits for investors but to trade for the benefit of a community of members or the community at large. Members of a community benefit society are not permitted to receive any payment by way of profit distribution. All such profits must be retained in the society and applied to its objectives in serving the community. That partly addresses the issue raised by the hon. Member for Buckingham (Mr. Bercow). Similarly, on a solvent dissolution, any surplus remaining after all liabilities have been paid off should pass not to members but to some other community benefit purpose under the current rules.
	A co-operative society also has a fundamentally different purpose from that of a company. It is set up by its members as a vehicle to pool their transactions and co-operatively to provide certain goods or services to themselves and/or the wider community. A co-operative is legally permitted to make a distribution to its members or customers from its surplus profits, but that power of distribution originated from the need to reimburse to its customers the amount by which they had, in effect, overpaid for their purchases. The mechanism is intended to ensure that customers are not exploited by their paying too much. That is illustrated by the fact that a distribution of profits is based on purchases and not on the size of the shareholding.
	I turn now to the detail of what is proposed in the Bill, but I recognise that this is a Second Reading and I do not intend to labour every clause. Clause 1, the value lock, seeks to give community benefit societies the option of protecting their assets for the purpose for which the society was established. The assets in a community benefit society are held for the benefit of the community for which the society was established. The biggest group of bencoms is housing associations, and I have referred to other examples.
	An important feature of a community benefit society is that, unlike the comparable company model, the commitment to community benefit is subject to review by the registering authority—the Financial Services Authority—so any attempt to change the constitution or water down such a commitment would not be approved. The assets may have been built up over many years with generations of people from different families in a community working to contribute to them. Charitable assets are effectively dedicated permanently to a particular charitable purpose. The purpose of the clause is to offer the same principle of protection to community benefit societies.
	Clause 1 would free societies from the risk of one group of activists in the organisation attempting at some stage to use its assets for their own benefit, rather than for its original established purpose. Such societies may not make distributions out of profits or surplus to members. On a solvent winding-up, assets should not be distributed to members. However, there is the ability to convert or transfer engagements to a company under section 52 of the 1965 Act. That would allow such restrictions to be avoided.
	Once a society is converted into a company, the shareholders can amend the rules to permit the distribution of assets to themselves. That is clearly a loophole in legislation that the Bill tries to tackle. The measure proposes that a society should be able to elect that no such power should be included in the rules, subject to obtaining the support of a 75 per cent. majority of those voting at a meeting when not less than 50 per cent. of those qualified to vote participate.
	Clause 1 specifically permits the constitution of a bencom to include provisions to prohibit the distribution of assets except on dissolution. Even when it is dissolved, the clause allows the imposition of significant restrictions on the distribution of the assets. It allows the prohibition by democratic choice. It is important to emphasise that it has to be the will of the society's members when it is set up and its purpose is defined. Existing societies can also call a duly constituted meeting and decide in favour of prohibition.
	Clause 1 allows for considerable flexibility. Sometimes a community purpose can cease to exist. My hon. Friend the Member for Greenock and Inverclyde (David Cairns) gave an example from his constituency. It could be argued that the purpose of the club had ceased to be relevant to the area. That may be an extreme example, but sometimes a community benefit society's purpose is no longer relevant to the community. There must be a mechanism to deal with that. If the bencom dissolved, its assets could be transferred to another community benefit society with similar provisions in its rules or to a charity.
	Clause 1 does not prevent the sale of an asset. For example, one could convert a building into cash, but the value should continue to be applied for a specific purpose. It would not therefore put a lock on a redundant building and mean that it remained an eyesore in a community for ever. The clause provides for converting an asset into another form of asset for disposal for a specific purpose. Crystal Palace Supporters Trust is an example of that. I am not a Crystal Palace supporter, but it is written into the trust rules that, in the event of dissolution, its assets must go to community football in the Croydon area.
	Clause 1 also allows a bencom to convert to a company or another body if the latter contains similar provisions in its constitution to protect the assets for the benefit of the community. The bencom is also permitted to convert to a different legal entity. However, the liberation of the assets from their original purpose is not permitted. The provisions will apply only if the society adopts them in its constitution by resolution of its members and if FSA approval is secured in the normal way.
	The safeguard could be perceived as a protection against a hypothetical risk. However, the strategy unit report emphasised the problem. It states
	"The thresholds for voting for conversion should be increased. In addition, it would be desirable for I&PSs to choose to protect their assets against any possibility of conversion. In this case, a system would be put in place to ensure that the assets would be transferred to an organisation with similar aims should the society dissolve or be taken over. However, this 'lock' on assets will not be appropriate for many I&PSs, and should be optional."
	Hon. Members will acknowledge that my description of clause 1 precisely fits the report's recommendation.

Huw Irranca-Davies: I wish the proposal well. Does my hon. Friend agree that a bencom with a regional or local aspiration should consider making that explicit in its terms of reference to ensure that the locked assets go back into the community?

Mark Todd: I agree. It is critical at a society's inception that members carefully consider its then purpose and any future developments.

Gareth Thomas: Before my hon. Friend moves on to clauses 2 and 3, will he acknowledge the interest of the Women's Institute Country Markets, another body that sponsors industrial and provident societies, in clause 1? As he acknowledged, we could not get the provision through last year. Will he join me in paying tribute to Ruislip women's institute country market, an excellent organisation to which some of my constituents belong?

Mark Todd: Clearly, my hon. Friend represents a colourful and thriving community, which contains many examples of industrial and provident societies. I join him in applauding women's institute country markets. A much more distinguished Member than me would counsel me not to give offence to the National Federation of Women's Institutes in any circumstances.
	Clauses 2 and 3 would effect some modest changes in the way in which industrial and provident society law reflects company law. Clause 2 would bring industrial and provident society law into line with specific aspects of company law. The proposed change was effected for companies in 1989 and subsequently for building societies and friendly societies. Hon. Members will recognise its relevance in other transactions that relate, for example, to local government.
	The proposed assimilation with company law relates to sections 35, 35A and 35B of the Companies Act 1985. Those sections are for the benefit of third parties that deal with companies in good faith and do not need to be concerned about whether, under a company's constitution, it has the capacity to enter into a transaction or whether the power of the board of directors to bind a company is subject to any limits. Such matters are important for third parties that enter into substantial transactions with societies, including trading and financial transactions.
	For example, it would be a considerable bar to trading if a society had a track record of trading just outside its constitutional limits, thus placing the third party at risk of not having its contract honoured. The directors of such a society could say, "We made an error in following our constitution and we have therefore moved ultra vires." Clause 2 is intended to deal with that circumstance.
	Company law reforms in 1972 and 1989 ensured that no question about the company's power to conduct specific business that was not mentioned in its constitution's "objects clause", or about how and whether power was given to the company's agents, could affect transactions as far as outsiders were concerned. It would be straightforward to apply the same solution to the problem of the capacity of an industrial and provident society or its agents to be questioned. I believe that the change would be consensual and mere common sense.
	The only safeguard that an industrial and provident society can currently provide to anyone who trades with it is to offer a copy of its constitution and say, "Please read that if you have any concerns about whether we're trading with you legally." Clearly, that is a long-winded and deterring approach to doing business.

Andrew Love: Is my hon. Friend attracted to the recommendation in the recent strategy unit report that we should do away with the term "industrial and provident societies" because it is redolent of their Victorian origins, and change it to "co-operatives and community benefit societies"? Has he thought about including that in the Bill?

Mark Todd: My hon. Friend will note that the Bill's title is precisely that. Until it completes all its stages and amendments have been discussed, the words "industrial and provident societies" remain relevant in English law. Although I am an admirer of the Victorian heritage, the terminology is off-putting. The strategy unit report refers to poor brand image. The brand of industrial and provident societies is scarcely enticing in a modern world.
	Clause 3 relates essentially to the formalities of conducting a society's business. It proposes that societies execute documents in the same way as companies. At present, the method is old fashioned and cumbersome, requiring the application of the society seal to documents. The proposed assimilation with company law would introduce the ability for societies to execute documents by signature of officers rather than by seal. The relevant provisions of the Companies Act 1985 are—it tells us something about English law that there is such a profusion of them—sections 36, 36A, 36B, 36C, 37, 38, 39 and 41. The clause will assimilate the necessary company law provisions and it represents a gain by levelling the playing field. I am aware of one society that has a board sub-committee devoted entirely to the authorisation of the application of the society seal. Following a society name change, it was necessary laboriously to approve the use of the seal on many hundreds of documents. A similar company would have simply been able to execute the documents by signature of an authorised officer.
	If the mutual sector is to develop, further sensible protection and reform of the rules will be needed. Many recognise the need to develop social enterprises. In the Prime Minister's foreword to "Private Action, Public Benefit", he drew attention to the
	"insufficient recognition of the particular needs of social enterprises, a rapidly growing group of businesses carrying out a wide range of activities for the benefit of society rather than the individual."
	I shall not make wild claims for the Bill. It does not solve all the problems of the industrial and provident society model, but it does, I hope, provide an opportunity to make significant progress. The Bill seeks to strengthen our co-operatives and community benefit societies, and I hope that the House gives it a Second Reading.

Stephen O'Brien: I draw attention to my entry in the Register of Members' Interests as the parliamentary adviser to the Institute of Chartered Secretaries and Administrators. As a former group company secretary of a FTSE 100 company, many of the issues raised touch on my direct experiences. I am also an honorary member, along with my spouse, of the Winsford Constitutional and Conservative club, which is the type of society covered by the Bill.
	I congratulate the hon. Member for South Derbyshire (Mr. Todd) for doing so well in this Session's ballot and for endeavouring to reform an aspect of the law that will bring real benefit to communities across the country. I know that the hon. Gentleman has stated his desire to present a useful Bill that can be passed into law. This Bill is a good example of an hon. Member using the pole position granted through the ballot process to demonstrate that Parliament has a crucial role in aiding our local communities.
	It is a particular pleasure to follow the hon. Gentleman. I noted that as my hon. Friend the Member for Mid-Norfolk (Mr. Simpson) raised a point of order, the hon. Member for Bolsover (Mr. Skinner) suggested from a sedentary position that he and some other hon. Members should be stranded in Cambridge. The hon. Member for South Derbyshire and I shared years together at Emmanuel college, Cambridge. It is of interest, therefore, that although we are on different sides of the House, we can join forces today, just as we did in those days.
	The hon. Gentleman's introductory history lesson, based on information gleaned from his father about his grandfather's experience in the House, was an interesting description of the way in which MPs' roles have changed over the years. I applaud him for thinking carefully about introducing a Bill that is permissive rather than restrictive. That is especially important in our day and age. The temptation in recent years has been to introduce Bills that curtail people's freedoms rather than to make them freer. That is why this Bill is to be welcomed. I was also extremely amused by, and rightly supportive of, the hon. Gentleman's sensitivity not to stray too far into falling on the wrong side of the WI country markets, raised by the hon. Member for Harrow, West (Mr. Thomas). The country markets in my constituency do an outstanding and critical community job.
	The Bill is closely defined in its scope, which is the right way to use private Member's Bills. It is clear that the hon. Member for South Derbyshire has worked closely with the co-operative societies. I extend my best wishes to them for helping to produce a timely, justifiable and broadly sensible Bill to sit within what is broadly defined as the voluntary sector. Although that term might give rise to some confusion, it is important to recognise that the historical context of the Bill, as set out by the hon. Gentleman, belongs to that fine tradition of people wanting to be part of the voluntary self-help mutually beneficial culture that served our country well for decades and, it could be argued, centuries.
	The charitable and wider not-for-profit sector covered by the Bill is both economically important and extremely diverse. It encompasses organisations of widely varying scale, purposes and structure. It is estimated that there are between 500,000 and 750,000 organisations in the charitable and wider not-for-profit sector in the United Kingdom. My right hon. and hon. Friends and I believe in encouraging that immense resource to be used to the benefit of all, especially, although not exclusively, the vulnerable in society.

John Bercow: My hon. Friend describes the position pithily. Does he agree that those excellent organisations form part of what Edmund Burke famously described as the "little platoon", which constitutes civil society and is the middle way between an atomised individual and the state?

Stephen O'Brien: My hon. Friend generously describes my contribution as pithy, but it does not come more pithy than that. I not only endorse what he says, but recognise how critical the little platoons are for this country to move forward. They help to ensure that we balance the dignity of individual families and communities against what is, at times, an over-mighty state and the arrogance that goes with it.
	I am sure all hon. Members are aware that co-operatives and community benefit societies provide essential services and amenities to communities. The list of the societies is diverse, ranging from housing associations to football supporters trusts, to social clubs and home care providers. It is helpful to have in mind the football trusts, be they rugby or soccer—as I still, perhaps anachronistically, call that form of football—and the Royal British Legion clubs. It is important to have in mind those examples as we go through the more detailed aspects of the Bill. For instance, perhaps one of the least controversial types of club is the British Legion club. It is hard to imagine that the purpose of such clubs would ever cease to exist. They not only give support to those who have served our country so well in the past; they honour the memory of those who made the ultimate sacrifice. That sacrifice has enabled us to be in this House today under the freedom of the rule of law, which our generation is lucky enough to enjoy in this democratic and civilised society.
	However, what if, over time, the membership of a British Legion club were to fall to such a level that it became important to review its operation, and the supporting assets given in perpetuity for that purpose? It is important to ensure that no one generation of membership can remove a benefit that is provided not only for past generations, but for future generations. None of us can ever know how the future will work out, or the extent to which those assets might prove of benefit to future generations.
	The voluntary sector has a key role to play in the renewing of our society. As my right hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) has said, the Conservative party will work with voluntary groups and other groups of all types, including co-operatives and community benefit societies, in breaking down the constraints that are currently applied to this sector. We have been listening, and will continue to listen, to the problems that such groups face, and we will seek to identify the solutions. The Bill before us today is a solution, and it defines the problem that it seeks to address well.
	To the extent that this Bill has not already done the work on co-operatives and community benefit societies, and in the hope that it does become an Act, we will build solutions to the problems faced by the voluntary sector into a voluntary society Bill, which we will lay before Parliament in the first Queen's Speech of an incoming Conservative Government.
	I want to look at the Bill in a little more detail. As has already been made clear, we are in broad agreement with its contents and intent. I should like to acknowledge the helpful advice that I was given by Mr. Martin Beaumont, a constituent of mine who is the chief executive of the Co-operative Group. Until last September, he was also chief executive of United Co-op, which serves the citizens of the north-west, including the local village shop in Bunbury, in my constituency, where my family and I shop every week. It is apparent that the governing legislation is outdated in comparison with company law, and it can be argued that that acts as a disincentive to wider use of industrial and provident societies, as they are still called, as a form of enterprise and organisation.
	The hon. Member for Harrow, West, who has already intervened, should be congratulated again on his efforts to reform the situation. The Bill before us attempts to move the law on, building on the industrial and provident societies legislation that he introduced so successfully in the previous Session. As I have said, the reasoning behind the Bill is sound and well-intentioned, but I have a few minor reservations and certain questions, which I hope the Government are ready to answer in summing up today's debate.
	It is perhaps easiest if I discuss the Bill's clauses, if I may, in reverse order. We support clause 3, as it will remove an often onerous and cumbersome regulation from the day-to-day running of such societies. It seems somewhat strange that, in a modern society, the formalities for executing documents still require the use of an authenticating stamp. I am old enough—as the colour of my hair perhaps displays, I am afraid—to remember what used to happen. Even in the late '80s, when I was acting group secretary of a large FTSE 100 company with 44,000 shareholders on its membership register, we would spend many hours signing share certificates individually. Nothing has changed to the detriment of those shareholders by the fact that that system is no longer current practice, and has quite properly been consigned to history, important though it was. The measure in clause 3 is an equivalent one, and it is therefore wholly appropriate and does not carry grave risk.
	Of course, the continuing justification for the use of seals is that they provide protection from wrongdoing. During the Committee stage of the Industrial and Provident Societies Bill, which was enacted last year following the hard work of the hon. Member for Harrow, West, the Government expressed sympathy with an amendment tabled by the hon. Member for Edmonton (Mr. Love)—he, too, has intervened today—the aim of which was similar to clause 3. Have the Government reviewed this procedure as part of the charity law review or the strategy unit's report, and in terms of protection against wrongdoing, what are their views on the use of seals and the replacement of that process?
	A great deal of work is going on in connection with the strategy unit's report. Does this Bill pre-empt proposals that the Government have yet to put forward, and which arise from recommendations by the strategy unit that are still being consulted on? Have the Government established what effect this change in the law might have on societies, and are they—as I hope they are—expressing towards it more than the mere sympathy that they expressed towards the amendment, to which I have referred, tabled by the hon. Member for Edmonton?
	We support clause 2, which will bring the law applying to societies into line with company law. It is essential that all parties dealing with co-operatives and community benefit societies can rely on the usual rules of ostensible authority, without risking being ultra vires. This is working well for companies under current companies legislation, and before such changes were introduced there was considerable discussion about the potential for abuse. In my business and professional career before being privileged enough to be elected to this place, I worked for a large manufacturing company with many subsidiaries, all of which had to comply with the Companies Acts. When the procedures for the use of seals and certification were relaxed for such companies, there was no demand, in the absence of evidence to suggest an increase in wrongdoing or uncertainty, to return to the status quo ante or an equivalent. So it is important to recognise that the track record should encourage support and acceptance of clause 2.
	This issue was examined before. In 2000, the Government reviewed the situation through a Treasury consultation on the proposal for a new industrial and provident societies Act. Paragraph 22 of that consultation states:
	"This aspect of the ultra vires rule no longer applies to companies, following enactment of the Companies Act 1989. There seems no reason why societies should not have an equivalent legal capacity to deal with others. So it is proposed to cease to apply this aspect of the rule to societies."
	It would be helpful if the Government could explain today why this recommendation has not been acted on. Do they still stand by the proposals included in that report, which was issued jointly with the Registry of Friendly Societies. If they do still agree with their own proposals, why has there been such delay? Surely today is the chance to ensure that they are implemented.
	Clause 1 offers the most potential for debate, as the hon. Member for South Derbyshire pointed out in his introduction and the time and detail that he devoted to that clause. The Government's strategy unit report, "Private Action, Public Benefit", recommended that community benefit societies should be permitted to protect their assets—this is the crucial point—in perpetuity for a public purpose. That is the nub of the matter. It is that important purpose that underpins the rationale and intent of the Bill.
	As the law stands, societies and the communities that they serve could easily be vulnerable to asset stripping. If a society converts to a company, it will be easier for the members to alter its rules and to allow distribution of valuable assets to members without thought of the consequences for the greater community. The Bill relates to assets that have been granted, or given, in perpetuity for the community, so it is right to protect such assets from distribution to members of a community at a given time. For these purposes, it is the community that evolves and changes, not the asset base that was granted to benefit that community generation after generation.

Michael Connarty: I declare an interest as I am a member of the West Quarter Labour and Community club in my constituency, which is owned by the community and local Labour parties.
	The hon. Gentleman referred to the British Legion. Is it not often the case that such social clubs have been superseded by many other facilities? Might it not be better to transfer the value of those assets to something that would be more valuable to the community to which they were originally gifted?

Stephen O'Brien: The hon. Gentleman raises an important point. As I understand both the intent and the detail of the Bill, it would provide that, in the event of evolution such as he describes, purpose is the important factor. There is provision for transfer on dissolution—the most difficult aspect—to another benefit society that satisfies the purpose. The main thing for us to do is rigorously to ensure that there can be no possibility of asset stripping. That would be a wrong motivation. As long as the purpose of the asset is kept, the community benefit is likely to be sustained. However, it would be wrong to set provisions in such a solid form of aspic that there was no chance of responding to changing circumstances such as those described by the hon. Gentleman.
	I was pointing out that the Bill would rightly entrench the assets, apart from a purpose-based transfer, such as we have just discussed. A transfer should not benefit an existing cadre of members. Transfer by conversion is a possibility, but the presumption is that the benefit should be maintained for the community over time.
	In the past, the Government have been against entrenching assets in principle. That applied to the co-operative sector, too. Do the Government agree with the strategy unit's recommendations and the supporters of the Bill that a different approach is appropriate for community benefit societies? During the proceedings on the Industrial and Provident Societies Act 2002, the strategy unit deliberations were referred to frequently, especially as regards the use of an asset lock and how it could be introduced for community benefit societies. The unit's recommendations supported the concept of entrenchment and the modernisation of industrial and provident society law.
	In parallel with this debate, we need to consider the wider implications; for instance, the Government's proposals for foundation hospitals, which also have an element of asset lock. The Government need to ensure consistency and clarity in their approach to legislation for different bodies; I hope that they will support the Bill in that regard.

Andrew Love: There is already an asset lock in relation to charities and credit unions. As Members who have read the strategy unit report know, it suggests that community benefit societies are a halfway house and that such protection should also be available to them.

Stephen O'Brien: The hon. Gentleman is right. However, the Government have not yet made clear their response to the recommendations in the very good report of the strategy unit. Of course we need to debate many aspects of the detail but the report is extremely useful in broad terms. In a sense, the Bill pre-empts much of what might follow from the recommendations and is one of the three measures that might be developed from them. We await the Minister's comments on that.
	As the hon. Gentleman pointed out, the Bill would regularise the position for the community benefit societies, which have become trapped between two stools. As he and my hon. Friend the Member for Buckingham (Mr. Bercow) have pointed out, it offers a middle way.
	The Government need to show that they have internal consistency in their approach to that aspect of the law. The point also applies to their proposals for foundation hospitals, which are being considered by Parliament.
	Naturally, we have reservations about some of the technical aspects of how asset locks might work. For example, what would happen to the assets of a society when it dissolved? That is addressed in paragraph (a), subsection (1) of clause 1, and although the Minister may not be able to go into such points in detail on Second Reading, they certainly warrant careful scrutiny in Committee.
	I urge the Government to support the Second Reading of the Bill. We are generally supportive of the measure and I look forward to debating a number of the points raised today during its—I hope—successful passage through Committee.

Gareth Thomas: It is a pleasure to follow the hon. Member for Eddisbury (Mr. O'Brien), especially given his fulsome support for the objectives of the Bill promoted by my hon. Friend the Member for South Derbyshire (Mr. Todd). As I am the first Back-Bencher to speak in support of the Bill, may I lead the tributes to the way in which my hon. Friend introduced the Bill? He demonstrated a grasp of the legislation and of many of the difficulties that face the community benefit society sector. His introduction of the subject will give the House confidence as he takes the measure into Committee and beyond.
	My hon. Friend has done an especially important job. As he rightly said, the fundamental legislation on industrial and provident societies dates from the 19th century and has been largely unreformed since then. He offers the House the chance to modernise a little further the rules and regulations under which co-operatives and community benefit societies operate and that is enormously welcome.
	Such organisations have, unfortunately, been in a twilight zone between the public and private sectors. Some of the enormously good work undertaken by the most successful co-operatives and community benefit societies has not received the publicity and attention that it warrants.
	For example, the excellent Tower colliery in south Wales—the only employee-owned coalmine in Europe—was set up precisely because a public sector organisation wanted to shut down the coalmine, with devastating consequences for that constituency. The initiative and entrepreneurial skills of the local community, using the co-operative model, have restored the coalmine for the community and kept wealth locked in that area.
	The attraction of co-operatives and community benefits societies is that they entrench real power and decision-making opportunities in the communities that are affected by the decisions that need to be taken. Many public sector organisations and, now, many private companies recognise the need to consult local people. Some of the best local councils use citizens juries, citizens panels and residents forums to assess what they do. Companies—for example, developers involved in planning—also seek to consult local communities. However, whereas those organisations retain the real power to make decisions for themselves—they keep it in the council chamber or the corporate boardroom—co-operatives and community benefit societies keep the power with the people who are affected by the decisions that have to be taken.

Colin Challen: My hon. Friend talks about strengthening power in the community. Does he agree that the Bill, if passed, should enhance that power against that of financial institutions, which tend to regard community benefit co-operatives or mutual sector bodies as rather strange, unusual things to which they cannot lend money and on which they put pressure to transform themselves into the normal kind of institution that they recognise?

Gareth Thomas: My hon. Friend is right to suggest that there is a lack of understanding about the co-operative and community benefit society model. Indeed, the fact that it is unreformed compared with company, building society and friendly society legislation has put off many organisations that may have wanted to use that structure. That has helped to reduce any enthusiasm among those who might lend to such organisations and has prevented them from doing so. The Bill offers the opportunity to reform several weaknesses in the legislation, which is excellent news.
	I particularly welcome clause 1. As my hon. Friend the Member for South Derbyshire said, we attempted to cover that topic last year in considering the Industrial and Provident Societies Act 2002. Indeed, those on all three Front Benches supported our proposals, but we were unable to resolve some of the technical concerns that rightly needed to be resolved. So my hon. Friend deserves particular praise for giving the House the opportunity to put that provision into law so soon after the strategy unit's ringing endorsement of the principle of clause 1. As the hon. Member for Eddisbury rightly said from the Opposition Front Bench, there are examples where the provisions in clause 1 already apply. Charities, housing associations and credit unions were mentioned. Clearly, clause 1 gives us an opportunity to provide consistency across the community sector.
	In addition, it is worth highlighting the importance of clause 2, on modernising the ultra vires or capacity issues, particularly given my hon. Friend's intervention. Clause 2 would help to give confidence to third parties in dealing with co-operative or community benefit societies. Let us consider the rugby club analogy. It is possible to imagine that similar towns have two clubs. We might call one the Tigers rugby club, which uses the industrial and provident society model; the other rugby club in the neighbouring town might choose the company model. Both clubs decide that they want to borrow £250,000 from the bank to build an extension to house a bar facility. If the England rugby team starts to do very badly in future and that has an impact on the membership of those clubs, the revenues will start to decline at both clubs. Both clubs run into financial trouble and cannot pay back the loans. The bank considers its options. What can it do? The bank knows that the rugby club that is a company has a charge on the club's assets and could get its money back. However, the rugby club that is an industrial and provident society could argue, if there is no reference in its constitution to providing social facilities, that the loan was ultra vires and therefore that it does not have to pack it back.
	That type of problem has occurred in the past. For example, in the 1980s, councils engaged in a number of interest-rate swaps. As has been said, that problem motivates financial services organisations to be cautious about lending to industrial and provident societies, so we need to use the Bill to resolve that unreformed element of the legislation.
	As I have said, this is an excellent Bill. I hope that the House will not only agree to it on Second Reading, but speed on to consider it in Committee and on Report. I hope that the House will consider in Committee or on Report whether the Bill offers the opportunity to modernise the legislation on a number of other issues, too. For example, it is worth seeking clarification on why Northern Ireland should be exempted from those reforms, given the existence of so many industrial and provident societies there. Why should those organisations be excluded from the benefits?
	I also hope that, now or on Report, the Minister will give some clue about a time scale for reforming the audit and accounting requirements that impose a much greater financial burden on industrial and provident societies than on companies. Will she say whether the Bill offers the opportunity to reform the regulator's powers to inspect societies? At the moment, the Department of Trade and Industry can, of its own volition, investigate a company that it suspects of fraud or wrongdoing. In the case of a regulator for co-operatives and community benefit societies, the Financial Services Authority cannot do that; it has to wait until it receives a complaint from a society member. Again, reform is needed because of the FSA's lack of power to intervene of its own volition, as that puts off organisations from dealing with industrial and provident societies or from using that route in the first place.

Andrew Love: One of the more successful aspects of company law has been the Company Directors Disqualification Act 1986, which does not apply to industrial and co-operative societies. If we are to get some of the benefits, we must ensure that directors of those societies are treated in exactly the same way as company directors.

Gareth Thomas: My hon. Friend is absolutely right, and I hope that we might hear about when such reforms might take place for co-operatives and community benefit societies. He may well remember that some of those issues were thrown into stark relief during the consideration of the Enterprise Act 2002, as such provisions were reformed and modernised for companies, but not entirely for industrial and provident societies.
	I hope that, during our consideration of the Bill, we might also hear whether there is a time scale for introducing, by statutory instrument, powers to modernise the insolvency provisions that exist for industrial and provident societies but have not been implemented.
	I pay tribute to my hon. Friend the Member for South Derbyshire for choosing this topic. He has done an excellent job in introducing the Bill, and I hope that it will have a smooth passage today and throughout its remaining stages.

Adrian Bailey: In speaking in support of the Bill, I should first declare an interest. I am a Co-operative Member of Parliament and vice-chair of the co-operative group in Parliament. Prior to coming to the House, I was employed for 18 years as a national organiser of the Co-operative party, and I am a member of many co-operative societies. To keep a certain political balance, I was once a member of the Winsford Labour club. I do not know whether it still exists and—if it does not—what happened to its assets on dissolution. Perhaps the hon. Member for Eddisbury (Mr. O'Brien) could advise me.
	I congratulate my hon. Friend the Member for South Derbyshire (Mr. Todd) on promoting the Bill. He may not recall the first time that we met. It was several years ago on a wet, windy, dark night in south Derbyshire, when he agreed to address a function that I had arranged on co-operation. On that occasion, he waxed eloquently on his commitment to the co-operative cause. In these days of cynicism about politicians, it is gratifying to see him demonstrate ably that he practises what he preaches in public. As he and others have said, one of the Bill's main purposes is to ensure that community benefit societies, registered under the Industrial and Provident Societies Act 1965, can dedicate their assets permanently for the community: the so-called asset lock.
	Ironically, the democratic nature and management of bencoms contain the potential for their ultimate self-destruction. The more successful such open and democratic organisations become and the more assets they accumulate, the greater their vulnerability to takeover by those whose only desire is to enter the organisation, manage it, and asset-strip it for their benefit. It seems appalling that, hitherto, there has been no legal barrier to prevent bencoms from being taken over by such a self-seeking bunch of individuals.
	Earlier, my hon. Friend the Member for South Derbyshire referred to the sepia-tinted photographs associated with co-operative societies. In my previous incarnation, I visited societies on many occasions to see those sepia-tinted photographs of the bewhiskered, waistcoated gentlemen who founded such societies—unfortunately, it was mainly gentlemen. We may feel that the values of those philanthropic visionaries are a little outdated, but the Bill is a way of updating those values and providing a framework in which they can continue to serve the very objectives that those bewhiskered Victorian gentleman envisaged.
	Fresh in the minds of most co-operators are the events that occurred in relation to building societies a few years ago. There was little protection within the rules, or within legislation, to prevent them from being taken over. About two thirds of the building society movement disappeared over several years. While there may have been legitimate issues to be debated concerning building societies, there can be no doubt whatever that the motives of the great majority of people in voting to privatise those companies had nothing to do with the long-term welfare of those societies. It was merely an opportunity to gain a windfall profit.
	Building societies have adapted their rules. The Nationwide led the way by enforcing a rule that new members should donate any windfall gains to charity. In many ways, that principle has been incorporated in the Bill. It would be a mistake, however, to think that the danger has passed for organisations registered as industrial and provident societies. It is astonishing that there are more than 8,300 of them, with assets of £61 billion, which provide potentially rich pickings for anyone motivated to try to take over some of those societies.

Stephen O'Brien: In a constructive attempt to help the Bill's progress, may I ask the hon. Gentleman whether he accepts that there is a clear difference between building societies, whose purpose is to benefit current members at any one time, and community benefit societies, whose assets would be deliberately endowed in perpetuity for the purpose defined? That is why a proper distinction should be drawn and why it is proper to consider the asset lock provision in the Bill.

Adrian Bailey: I accept the hon. Gentleman's point, but the point that I want to emphasise is that a group of highly organised individuals are targeting mutually based organisations with a view to exploiting any deficiencies in their rules or legal structures in order to take them over and asset-strip them. There is an organisation that is specifically dedicated to that purpose, but I will not advertise it in the Chamber today. It exists, however, and we must be aware of it and the threat that it poses to co-operative and community benefit societies.
	One positive development that arose from what happened to building societies was that it forced those that survived to demonstrate the virtues of mutuality. It also provoked something akin to a public debate on the advantage of mutuality. Above all, it alerted the Government to the potential that community benefit organisations can offer to the delivery of public services in a more market-sensitive way. The Bill is needed not just to protect existing bencoms but for a positive purpose: to enhance the attractiveness of alternatives to existing company models. It is not just a defensive piece of legislation, but one that offers enormous potential. I would single out three areas in that regard.
	The first is the existing social enterprise sector, which is growing but will no doubt grow faster if it feels that enterprises will not at some time in the future succumb to members taking over and using their accumulated efforts and assets for speculative purposes. People who invest in social enterprise do so to meet specific social needs. They will have the security of knowing that there is a way of protecting their form of contribution, whatever happens in the future of the bencom. Existing bencoms will also be provided with an opportunity and an incentive for members, in considering whether to introduce the asset lock, to debate the long-term purposes of their organisation. That will raise awareness and potential commitment.
	It is not only the existing social enterprise sector that could benefit. My hon. Friend the Member for South Derbyshire mentioned in his speech the dissatisfaction with the privatised utilities. It is fair to say that the privatisation of those utilities demonstrated that shareholder-driven priorities did not sit comfortably with public good or public welfare. The route proposed in the Bill offers an alternative somewhere between the monolithic state provision of old and the profit-seeking, shareholder-driven private sector company of more recent years. Currently, the favoured replacement mechanism appears to be the company limited by guarantee, which may be appropriate in some cases, but I and many others believe that the model proposed in the Bill offers far more potential for the future. Above all—this may be crucial in the Government's development of public service policy—the Bill offers a model to provide public services, particularly in health and social care, that will enhance participation, enable access to a wider source of investment and develop roots in local communities. The Bill will deal with one of the major problems that impede that development—the security of public assets once they have been transferred.
	In many ways, the old demarcation between the public and the private sector is becoming blurred. The consumer is more concerned about the quality of services than how they are delivered. In order to improve services, it is important to give people a stake in them, and I believe that bencoms, by reinvesting profits in the service rather than rewarding shareholders, and by encouraging community involvement and participation by employers, offer an important alternative to existing structures and models.
	The Bill removes a major obstacle to the development of bencoms. They may or may not be the answer in every case, but there can be no doubt that if the Bill is enacted they will become a relevant and significant option in the delivery of our public services. 11.1 am

Vincent Cable: I support the Bill both as a party spokesman and as an individual. Indeed, I was privileged to be asked to sponsor it. I pay tribute to the hon. Member for Harrow, West (Mr. Thomas), who led the way in developing legislation in this field.
	I came 10th in the ballot for private Members' Bills last year, and was treated to a seminar from the Government Whips in which it was spelled out in terms that even the slower among us could understand that there are two choices: either one can choose a Bill that is useful, practical, sensible and uncontroversial, in which case there is a reasonably good chance of its going through, provided that the shadow Leader of the House is in a benign mood on the relevant Friday morning, or one can go for something radical and controversial that annoys Ministers, in which case one gets a few hours of fame and then nothing else. I can see that the hon. Member for South Derbyshire (Mr. Todd) benefited from the same seminar and came to the same conclusion as I did. As a result, we have a useful and practical Bill that I hope we can all rally behind.
	Five years ago, many of us who were enthusiastic about the mutual movement felt that there was an opportunity for a big leap forward. There was a burst of enthusiasm for mutuality among think tanks such as Demos, philosophers such as Anthony Giddens and politicians such as the right hon. Member for Birkenhead (Mr. Field), who was suggesting that the welfare state should be recast around mutual institutions. There was a great deal of hope, but in practice, although there has been some growth, it has been modest and incremental. The positive changes to the building society regulations have certainly helped. The legislation promoted by the hon. Member for Harrow, West helped, too, as will the three Bills in the pipeline, but they are quite modest.
	The paradox is that, although there is great enthusiasm for mutuality across the party political spectrum—many people think that it is the model of organisation—many mutual bodies have struggled. That is especially true of the traditional mutuals rather than the community benefit societies. The hon. Member for West Bromwich, West (Mr. Bailey) spoke about the tribulations of the building society. When I first became a Member, I belonged to a group called Save Our Building Societies, which tried to stop the process of attrition. Market share has now stabilised at around 20 to 25 per cent., with the help of regulatory change and the ingenious asset lock devised by the Nationwide, but it is not an expanding sector. The mutual insurers—Equitable Life, Standard Life and others—have struggled even more. There are problems in the friendly society sector, which does much useful work but is a shadow of its former self. The Co-op almost suffered a humiliating takeover by an asset stripper.
	At the same time, there has been tremendous grassroots growth of mutuality, although it is sometimes difficult to recognise. For example, there are the after-school kids' clubs, which have about 15,000 to 20,000 members and are growing rapidly, and the pre-school playgroups, which had well over 100,000 members at their peak, although they have taken a hammering from the nurseries. They are predominantly community benefit mutuals.
	There are also groups such as the Workers Education Association and, in a way, its successor, the University of the Third Age, which is a nationwide mutual with many thousands of adherents, providing community benefit, which is expanding and flourishing.
	There has been a growth of mutuality in the health sector. Regardless of whether foundation hospitals succeed and take a mutual form, many local doctors have formed mutuals to deal with after-hours care, for example. Mutual organisation provides a useful vehicle for that. Many mutuals are so successful that we forget that they are mutuals at all: we tend to think of BUPA as private medicine, but in fact it is a mutual. Some mutuals have become highly successful multinational companies. If Bill Gates lies awake at night worrying about competition, he worries not about traditional companies, but about Linux, which is a true mutual. I am interested in whether the community benefit provisions would apply to such big operations, which could well define themselves as community benefit societies. Would they fall within the provisions in the Bill? I do not know whether the Government have thought about that.
	All those new organisations are not emerging artificially. Several of those who have spoken today have explained the demand and need for mutuals, which is partly an impetus towards diversity and getting away from the rigidity of the private limited company on the one hand and state or local government bureaucracy on the other. It also stems from the fact that many activities require a blend of community mindedness with businesslike efficiency and entrepreneurial flair. Somehow, those have to be combined in the same institution. Mutual organisations, and especially community benefit institutions, are really the only models that achieve that. The mutual structure is ideal for something that is rooted in the local community but none the less businesslike.
	Despite the need, and the good things that are happening, community benefit societies are not spreading as rapidly or on the scale that they should be. One of the main reasons for that is tackled in the Bill—the problem of assets. There are many reasons why the lack of an asset lock can be extremely debilitating to mutual organisations. The Co-op has been mentioned. Although I represent the Rugby Football Union as the Member for Twickenham, my heart is still with my old football club in York, which is where I grew up. York City is a wonderful example of a club succumbing to unscrupulous asset strippers but then being rescued by community spirit.
	A problem that is perhaps less acute than that of asset stripping is, however, more difficult to deal with. When a mutual community benefit organisation has become fuddy-duddy and inward-looking and people within it want to do new things and make it grow, they often take the view that the only way of doing that is to escape from the mutual structure. There are often, in a sense, creative reasons why mutuality breaks down, and somehow that has to be overcome.
	Then there are cases in which a community benefit group is providing a useful service but has valuable assets. Allotment holders and British Legion clubs, for example, find themselves, because of economic change and development, sitting on a gold mine. There is great temptation to try to find a way of cashing in the assets and distributing them among members in such a way that the community benefit is lost. Those different factors lead to the need for a more positive approach to the asset lock question.
	I understand the dilemma. I remember debate on the Industrial and Provident Societies Bill, promoted by the hon. Member for Harrow, West, in which the Treasury argued that there are dangers in asset locks—assets get tied up in unproductive uses. That is a problem, for example, with private trusts. However, there is now a weight of evidence that one must be much more positive.
	The hon. Member for Edmonton (Mr. Love) intervened to remind us that asset locks are available in the credit union and charitable sector. They are widespread in the European Union, which is one reason why mutuals on the continent are so much more successful. The Government strategy unit report effectively endorses the principle, too. So, we have got to the point where I hope that the Government accept the principle and recognise that the argument is not always clear cut.
	The one question that I have is why the provisions must be quite so restrictive. As I understand the Bill, in order to vote an asset lock into perpetuity it is necessary to have a 50 per cent. turnout and 75 per cent. agreement. I would have thought that 50 per cent. of members voting for such change would be adequate. I ask the Minister and the hon. Member for South Derbyshire to justify such a restrictive provision. Given that minor query, I strongly support the Bill. It is an excellent step forward. I hope that the Government will endorse it and that it speeds through the House.

Louise Ellman: I am a member of the Co-operative group of Members of Parliament and I am very pleased to support this very important Bill. I add my congratulations to those paid to my hon. Friend the Member for South Derbyshire (Mr. Todd) on bringing the Bill before the House. As he said in his initial comments, it is about taking co-operation forward and building on the co-operative movement, which has achieved so much and become such a fundamental part of our society.
	I see this Bill as an opportunity to move us into the future and to build on all that is good in co-operation. Co-operation in essence is about people working together to provide goods or services that benefit members or the community on the basis of mutual support or ownership. That is extremely important and has been a fundamental contributor to what is good in our society. Co-operation has a very fine history. Many are aware of its importance to production, retail services, agriculture, banking, finance, housing, funeral provision, and more recently, as hon. Members have said, to the wide range of social clubs.
	Co-operation is part of a movement. When co-operatives were first developed in strength they were seen as the beginning of a co-operative commonwealth—a new society where the values of mutuality and self-help were central. The co-operative movement is a proud part of the Labour movement, but its virtues are so self-evident that they are supported and, indeed, adopted by those well outside those confines. Indeed, judging from the comments this morning of the hon. Members for Buckingham (Mr. Bercow), for Eddisbury (Mr. O'Brien) and for Twickenham (Dr. Cable), we are all co-operators now.
	One area in which co-operation has been distinguished and has a great future is finance. The successes of credit unions are well known. They are an excellent example of applying loans on the basis of self-help and mutual support without exploitation. Over the past few years, credit unions have grown considerably in number from 73,000 in 1992 to 220,000 in 1999, although we still have a long way to go. It has already been clearly shown that credit unions make a great contribution to individuals' well-being and to dealing with social exclusion. Indeed, they are a vital part of regeneration.
	I want to draw particular attention to the Co-operative bank as a fine example of co-operation—working for individuals, proving that it is a commercial success and leading the way in the development of our communities and society. I pay tribute particularly to its former chief executive, Terry Thomas, who is now a Member of the other place. During his tenure at the Co-operative bank, he began what has become commonplace in banking but was unusual and revolutionary in its time: ethical banking. The Co-operative bank led the way, showing that banking could be commercially successful while at the same time responsible to the community as a whole.
	Moving on from ethical banking, the Co-operative bank took a lead in working with business, in particular to improve the environment. It set up the first business environment centre in the country when establishing its organisation in Manchester some years ago. The bank is a fine example of co-operation, showing how the co-operative movement combines individual need, self-help, mutuality and commercial success, leading the community forward on the basis of those values.
	Several hon. Members have mentioned the importance of the growing social enterprise sector. That is one area where the Bill will have particular relevance. It is highlighting the importance of mutuality to production, enterprise, people working together and to meeting community need. There are particular examples of social enterprise in Liverpool that have national significance. In developing the provision of furniture particularly for poorer people, in providing training and now in developing Bulky Bob's in recycling, not just in Liverpool but in London and other areas of the country, the furniture resource centre has shown the importance of social enterprise and individual initiative.
	It is in Liverpool, too, that another body vital to the development of social enterprise is already working successfully. I refer to the Merseyside special investment fund, which was set up in 1996 as an experiment in how the private sector could work with objective 1 funds to develop business in the Merseyside area. In the five years that have passed, it has invested £32 million, attracted another £88 million and supported 600 businesses and 5,000 jobs. What is most significant is that only a few months ago it set up a new loan fund, initially of £2 million, and it is ready to lend between £3,000 and £100,000 not to conventional businesses but particularly to community-based businesses. It anticipates that over the next few years it will be supporting 80 such community-based businesses, involving 1,000 jobs.
	I find it highly significant that the successful Merseyside investment fund, which started in Liverpool and is now working with objective 1 areas throughout the United Kingdom, regards as important the opening of a new fund that is directed especially towards community-based businesses. That is a clear indication of the importance of social enterprise and community business. I am sure that the fund will work with the already established Phoenix fund and local investment funds, as well as Business in the Community and the funds in which it is involved. The Bill is an important element in giving more support to the social enterprise movement and community businesses in general as they develop.
	The work of the Eldonians in the Vauxhall area of Liverpool is well known. Indeed, they are hailed in this country and throughout Europe as a fine example of co-operative enterprise that considers both individual ventures and community regeneration. Their successes include housing, care for young and older people, sports facilities, and wider regeneration activities in the Vauxhall area. I hope that the current discussion of schools' reorganisation in Vauxhall will take account of the excellent work being done by the Eldonians. The Bill is directly relevant to the work of such groups.
	The Bill is important because it marks a new and significant stage in the development of co-operation. It is about protecting assets, thus helping the work of community-based organisations to proceed more smoothly and supporting those who want that part of the sector to expand. The value of co-operation and the co-operative movement has already been shown by its direct achievements and the direct support that its has attracted. I congratulate my hon. Friend the Member for South Derbyshire on bringing the Bill to the House. In years to come, it will be seen as another staging post in the growing success of co-operation, and the growing acceptance and recognition by the whole of our society of the fact that co-operation is a vital part of our economic progress, based on the everlasting values of mutuality and community benefit.

Meg Munn: Like other hon. Members, I congratulate my hon. Friend the Member for South Derbyshire (Mr. Todd) on obtaining first place in the ballot and on his choice of subject for his private Member's Bill. Like my hon. Friend the Member for Liverpool, Riverside (Mrs. Ellman), I am a member of the Co-operative group of MPs, and I am delighted to support the Bill.
	By building on the improvements made last year, the Bill extends into public services. This week, I met groups of constituents who are extremely concerned about council housing and what might happen to them in the light of changes in ownership. They want to know from whom they will be renting properties in future. Developing other forms of organisation such as housing co-operatives, and ensuring that such organisations enjoy greater security, will enable more people in local communities to have greater confidence when changing from state and local authority ownership to locally owned organisations. In delivering public services, it is vital that people do not feel that they are being "done to", but feel empowered to be more involved in the delivery of the services that they receive.
	One sector in which co-operatives have started to develop is care services. Having worked in social care for many years, I am especially interested in the sector. In September, I visited the Willows residential home in Codsall, which is part of the West Midlands co-operative society. I was impressed by the home, but asked myself whether it was merely well run, or whether it was different because it was a co-operative. As I talked to the staff, it became clear to me that the values that are at the heart of co-operatives make a real difference to staff teamwork, their investment of their time in the home, the training that they receive and the qualifications that they are able to gain. Furthermore, the residents feel confident in the home and its future because it is a co-operative.
	In my view, residential care should not be the only service that is provided in the co-operative way. Much of our debate on care of the elderly focuses on residential and nursing homes, but most elderly people want to stay in their own home, and if they need care, they want that care to be provided in their home. I was encouraged to learn that the West Midlands co-operative society is already considering both the provision of care through short stays in the care home, to enable people to recover from illness, and how to ensure that after the short stay, when the person returns to their own home, domiciliary care can be provided. In that way, if people become so disabled that they need permanent residential care, they will already be familiar with the home and the people who will care for them there. That is an extremely beneficial model of care.
	Co-operatives can provide such services better than private organisations, not only because they recognise the benefit of providing through care, but because of the values that are at the very heart of co-operation—the social values that co-operatives hold dear, the investment of surpluses to build service quality and capacity rather than generate profit, and the drive to engage and empower service users. The residents of the home that I visited were seen as partners in provision—care was not simply given to them; they were asked about how they wanted the care to be provided and they were involved in the running of the home. The West Midlands co-operative society is examining ways of involving other stakeholders—families and other interested parties in the community—in discussions about the way in which care is provided.
	Co-operation is about engaging and empowering people—engaging communities in service development and management, and in monitoring and sustaining provision. For me, the heart of the process of providing services in a co-operative way is the long-term commitment to sustainable local provision. It is not about going in, providing a service and continuing to do so only as long as it delivers a profit. Especially in the sustained provision of services to vulnerable people, only that long-term commitment can provide the security that both services users and communities seek. I am delighted to be here to support the Bill on Second Reading.

Andy Burnham: A Bill has to be a good one to keep me from Leigh on a Friday, and I am delighted to be able to say that the Bill before us is one such Bill.
	Supporters trusts have been mentioned during the debate. I have an interest in that I am the chair of Supporters Direct, the Government-backed initiative to promote supporters trusts. The fact that the past two years have seen two prominent Bills that are relevant to the mutual sector provides clear evidence that the sector is on the march again. It is only a matter of time until many more people recognise that mutual ownership has answers to some of today's problems, whereas other, corporate forms have failed communities and people. Nowhere is that analysis illustrated more starkly than in professional football.
	The welcome proposal in the Bill of an asset lock has great relevance to the beautiful game. Today, football is bringing the concept of mutual ownership to people who might never have tasted its benefits before. Hon. Members should reflect on the fact that, in the past four years, 50,000 people, many of them young men who had taken little interest in the democratic process hitherto, have become members of supporters trusts. They are now experiencing at first hand what mutualism is all about.
	There are now 80 not-for-profit democratic supporters trusts in England and Scotland, all of which are industrial and provident societies, owning varying percentages of the league clubs with which they are associated. In the most celebrated cases—Lincoln City, Chesterfield and the new AFC Wimbledon—the supporters trust owns the club outright. It is my view and my hope that, if passed, the Bill will strengthen and protect these trusts.
	The prolific growth of mutualism in football is a direct consequence of the way in which the private ownership model—the company model—has been shown to fail supporters and communities throughout the country. Today, professional football in England and Scotland is in financial crisis, and some of the game's oldest names—York City, Port Vale, Bradford City, Tranmere Rovers—stand on the brink of extinction.
	Each club is a proud and cherished community institution. I stress the word "club", because they all had typical mutual beginnings—factory teams, church teams, boys clubs. However, as football became more popular and players began to be paid, the clubs set up as companies to limit the liabilities of their directors. At the time, the Football Association recognised the potentially devastating conflict of that, and introduced rules to prevent asset-stripping of grounds and the leaching of money out of the game by payments to directors. Sadly, its fears have been proved well-founded in recent years and the finances of many once-proud clubs have been plundered for private gain.
	Let me mention two case studies that show why the Bill is relevant to football and why the asset lock proposals could be of great benefit to football supporters.
	York City, a club mentioned by the hon. Member for Twickenham (Dr. Cable) and a great name in English football, is today in administration, on the brink of extinction. Two weeks ago, the York City Supporters Trust, a mutual society that Supporters Direct helped to create, had to pump £90,000 into the club just to keep it going over the next few weeks, for no share return whatever. It is in this parlous state because of the actions of its former chairman, Douglas Craig, whose activities were brilliantly exposed in The Independent by columnist David Conn. Unbeknown to the fans, he transferred the ownership of Bootham Crescent, the club's main asset and traditional home, to a holding company called Bootham Crescent Holdings, specifically to bypass FA rules. Craig—I hate to inject a partisan note into the debate—formerly a Tory councillor, stands to profit personally to the tune of £3.5 million if a bid to build houses on Bootham Crescent is approved, having bought his shares for not much more than £120,000 in the early 1990s. By contrast, the club is crippled with a range of debts and now fears that every match will be its last.
	York City is an organisation nurtured and cherished by its community. One of its stands—the David Longhurst stand—was built in memory of a player who died on the pitch during a game, and was built with money donated by the fans and ordinary people. Now it will be bulldozed for houses.
	The case of Wimbledon football club is a different example. It highlights the strengths of the community benefit society model and the appalling weaknesses of the private company model when it comes to safeguarding a community organisation such as a football club. The key word is democracy. Whatever anyone in football says, supporters see these clubs not as businesses but as public bodies—public property. It has been widely reported that the club's chairman, Charles Koppel, plans to remove Wimbledon FC from south London to Milton Keynes, 100 per cent. against the wishes of the fans, who have not been consulted on whether they think that it is a good idea. Those two examples illustrate why mutual solutions have, by necessity, gained currency among football supporters.
	A supporters trust is initially a vehicle to raise cash to save a club, but if it builds influence and ownership in the long term it can save the club for future generations, protect the assets and exert direct democratic control over how the club is run. Douglas Craig is certainly not the first person to asset-strip a football club for personal gain, and he will not be the last. The private ownership model has left clubs too unaccountable and too lightly regulated—easy meat for the unscrupulous to ransack and bleed dry.
	If, back at the origins of the game, clubs had set up as mutual organisations, as other professional sports clubs did—my hon. Friend the Member for Harrow, West (Mr. Thomas) mentioned that—many of these problems might have been avoided, but they were not and we are where we are. Nevertheless, I hope that, in the early part of this century, football will belatedly go down the mutual path.
	Supporters Direct has been behind the spread of supporters trusts. We shall soon be looking to engage directly with clubs to see whether we can develop a full community mutual model for football that will bring financial incentives for going down that route and ensure that all proceeds are reinvested in the club. Some would say that that is not the big league; cynics say that football league clubs have been not-for-profit for many years. I would not comment on that; suffice it to say that, at the moment, football league rules prevent a mutual organisation from owning a football club, and I hope that the right hon. Member for North-West Cambridgeshire (Sir Brian Mawhinney), the new chairman of the Football League, who is not present today, might consider that and allow mutual organisations to own football league clubs. It is in that way, if the measures in the Bill become law, that football assets throughout this land will be protected against the abuse and asset-stripping that we have witnessed in recent years. It will help to preserve a diverse and extended football league across all the towns of this country.
	If that day comes when we see mutualism in football, the great attraction of the Bill for football fans will be that the profiteering motive will be entirely removed from the equation. For supporters trusts it holds out the enticing prospect that if they can take control of their club they can effectively save it for this generation and generations to come. It is unlikely, but perhaps one day a few football grounds may ring to the chant of, "There's only one Mark Todd".

Ruth Kelly: I should like to start by thanking my hon. Friend the Member for South Derbyshire (Mr. Todd) for introducing the Bill so eloquently. He set out the issues clearly and in depth, and demonstrated a thorough understanding of them. There have also been interesting and important contributions from several of my hon. Friends, particularly my hon. Friend the Member for Harrow, West (Mr. Thomas), who has led the way in this matter, and also from my hon. Friends the Members for West Bromwich, West (Mr. Bailey), for Liverpool, Riverside (Mrs. Ellman), for Sheffield, Heeley (Ms Munn) and for Leigh (Andy Burnham).
	The Government are clearly committed to the mutual sector, but we are keen to ensure that the industrial and provident society is seen as a modern and flexible corporate form within that sector, while retaining the unique and distinctive qualities that mark it out as a mutual organisation. That is why we gave our support to the private Member's Bill introduced last year by my hon. Friend the Member for Harrow, West, and I congratulate him on his achievements in ensuring that it reached the statute book.
	In addition, last September the strategy unit completed "Private Action, Public Benefit"—its review of legislation for the charity and not-for-profit sector. It proposed wide-ranging reforms, including proposals to modernise the industrial and provident society legal framework. Those recommendations have been the subject of a public consultation, which has now finished. We are currently examining the responses received and considering options for taking forward the agenda, but I emphasise to the hon. Member for Eddisbury (Mr. O'Brien) that the Bill does not pre-empt reforms that the Government may otherwise have made, somewhat further along the path, as the initial responses from the consultation are very positive towards modernisation of the sector.
	The Government certainly welcome this new opportunity to update industrial and provident society legislation. I am very sympathetic to the changes and the reforms that it is trying deliver, because they are consistent with our aim to support and modernise industrial and provident society legislation, and to strengthen such societies' contribution to social enterprise. I am therefore pleased to say that, in principle, the Government can support the objectives behind the Bill.
	However—[Interruption.] There is always a "however." We believe that the Bill will require amendment to ensure that those objectives are genuinely achieved. I have had constructive discussions with my hon. Friend the Member for South Derbyshire on the nature of these amendments, and I hope that we shall shortly be able to agree where changes might be made, so that the Government can give their full support to the Bill.

Stephen O'Brien: I hope that in the spirit of the constructive approach that hon. Members on both sides of the House have taken to the Bill, and to speed its passage, any amendments that the Government have in mind can be shared, perhaps even before we reach Committee.

Ruth Kelly: We shall certainly seek support from hon. Members on both sides of the House to ensure the smooth passage of the Bill. I look forward to fruitful discussions with all interested parties.
	I should like to examine briefly the main clauses. Clause 1 proposes to allow community benefit societies to include a rule in their constitutions, which could not subsequently be reversed by its members, prohibiting the distribution of their assets to any person or body other than another society with an equivalent rule or a charity. It also prohibits conversion to a company or other body, unless that company or body has an equivalent rule.
	At the moment the Financial Services Authority will not in practice register a community benefit society unless it has such an asset lock-in in its constitution, but that restriction is not totally binding. For example, a society could convert to a company and some time later reverse the asset lock-in rule in its company constitution.
	During the passage through Parliament of the Industrial and Provident Societies Act 2002, the same asset lock-in provision was considered. At the time it was acknowledged that there were benefits and potential drawbacks to such an approach, but we were not in a position to consider both the policy and legal implications within the time scale of the private Member's Bill process. Since then the strategy unit has recommended that an asset lock-in provision is made available to community benefit societies.
	We will need to study carefully responses from the public consultation on the strategy unit report, but I understand that those on the asset lock-in proposals have been positive. The Government therefore wish to undertake further work on the possibility of an asset lock-in provision for community benefit societies to examine how a scheme might work. We will further consult on the detail and the possibility of introducing legislation to enact such a regime, if it continues to appear sensible and feasible to do so.
	I am doubtful that it will be possible within the time scale available in Parliament for the Bill to establish in detail exactly what substantive provisions should be made in relation to an asset lock-in regime and what amendments would be needed to make it fully workable. However, the Government support that proposal and wish to examine the suitability of an asset lock-in regime. I therefore commit to continue to work with my hon. Friend the Member for South Derbyshire to see whether proposals can be brought forward during progress on the Bill that will ultimately facilitate the implementation of an asset lock-in regime for community benefit societies.
	The hon. Member for Twickenham (Dr. Cable) raised a couple of specific issues in relation to a possible asset lock-in. In particular he asked whether a large mutual might consider changing its constitution to become a community benefit society so as to take advantage of the proposals that are under consideration. In principle, we believe that a company could set up a community benefit society and transfer its assets to it. However, it would need to satisfy the criteria of benefiting that society, a condition which is part of the constitution and make-up of community benefit societies. He also queried the 75:50 thresholds for conversion. I cannot give a commitment now that the Government would wish to pursue that matter, but I am sure that the issue will be debated further in Committee and I look forward to the hon. Gentleman's contributions on that subject.

Stephen O'Brien: I am grateful to the Minister for giving way a second time. I understood her to say that, while the Government broadly support the Bill, she is concerned that the timetable for private Member's Bills might mean that the Government will not be ready with the detailed proposals that might fit into the Bill. She cloaks that with the promise of further consultations with the hon. Member for South Derbyshire. Can she explain the impediments to fitting in with that timetable? It seems to me that, with the support of hon. Members on both sides of the House, delay may be unnecessary so she might need to revise her idea that this measure is not intended to pre-empt the strategy unit report, given that she also supports its recommendations in this regard.

Ruth Kelly: Yes, I can. The strategy unit report raises various issues that we will need to consider in detail. They include precisely how a regulator would work, and the precise terms under which assets could be transferred to another community benefit society. In principle, we could overcome many of these difficulties, given more detailed consultation. The plan is to enable the passage of such legislation in due course, subject to detailed consultation, particularly with the benefit society movement, to make sure that we get it right, rather than to suggest provisions during the passage of the Bill which may be counter-productive to the movement. In particular, we are concerned about preserving the flexibility of the movement to deal with unforeseen circumstances. Clearly it needs to be sufficiently flexible to evolve over time to changing circumstances. We will need to get the precise details right, but in principle the Government are supportive of such a move and it may well be possible to work with my hon. Friend the Member for South Derbyshire and come up with a proposal that would allow us to pass legislation in due course.
	Clause 2 proposes to change the powers and capacities of industrial and provident societies in order to improve their ability to enter into business transactions. The current risk for those dealing with societies is that transactions may be invalid if a society performs an act that is within the law but outside the rules of that particular society. An apparently legitimate business transaction might then prove to be invalid. The current situation therefore places a burden on those trying to do business with societies to investigate the societies' rules. It may also deter some from conducting business with a society if it is perceived to involve a higher risk of a contract being declared void.
	The Bill seeks to address this by applying to societies and their committees certain company law provisions which allow a company and its directors to bind the company if it acts outside its constitution but within the law—a contract made under these circumstances remains in force between the contracting parties without absolving directors and other company officers from their obligations or liabilities to company members.
	These principles are easily transferable to the industrial and provident society context and measures to this effect would increase protection for those doing business in good faith with a society. They should also facilitate the ability of societies to conduct business and we therefore fully support the principles behind the clause.
	Clause 3 aims to make it easier for societies to enter into contracts and execute documents. I do not propose to examine those provisions in detail now, but I take note of the comments made by the hon. Member for Eddisbury.

Andrew Love: I thank my hon. Friend for giving way. A number of hon. Members have suggested further amendments that could be included in the Bill, very much along the lines of the Treasury consultation document that was circulated in 1998 and which included many non-controversial provisions. Would the Minister be sympathetic to some of those non-controversial amendments being included in the Bill?

Ruth Kelly: Following the strategy unit report, the Government will have to make a number of decisions about priorities and which areas we wish to pursue in relation to industrial and provident societies. The Bill's progress and what we can do within its framework will determine how we can take the movement forward. It is a little early for me to say precisely what those priorities may be, although in due course we will make recommendations for the sector.
	In principle, we are sympathetic to clause 3, which makes it easier for societies to enter into contracts and execute documents, and we very much hope to be able to support it in Committee. In that context, I look forward to the debate with the hon. Member for Eddisbury on the nature of protection for members.
	The proposals are a welcome step towards the modernisation of the industrial and provident society movement, as they would increase its operational flexibility. The Government therefore support the principles behind the clause, but again we will need to examine it in detail, and work with my hon. Friend the Member for South Derbyshire to table any necessary amendments to ensure that the Bill achieves what is intended.
	Finally, I reaffirm the Government's commitment to a thriving mutual sector. I congratulate all those who have been involved in the preparation of the Bill and look forward to assisting with its progress through Parliament.

Mark Todd: With the leave of the House, I should like to respond briefly to Members' comments and speeches. First, I thank everyone who has attended the debate, whether they have spoken or not, for demonstrating support for the sector and their interest in its future development.
	I thank the hon. Member for Eddisbury (Mr. O'Brien) for his thoughtful and positive contribution to the subject and the way in which he reinforced his points with his experience in the corporate sector. My hon. Friend the Member for Harrow, West (Mr. Thomas) drew attention to the issue of ultra vires and a possible discussion about audit and accountancy frameworks which arises if relevant amendments are tabled in Committee. I am sure that those issues will be debated again should the Bill reach that stage.
	My hon. Friend the Member for West Bromwich, West (Mr. Bailey) debated the issue of the asset lock and its meaning, and emphasised the future use of the industrial and provident society in developing the mutual sector. The hon. Member for Twickenham (Dr. Cable) touched on the diversity of existing mutuals and made some detailed points about the democratic framework which, I am sure, will be debated further in Committee. My hon. Friend the Member for Liverpool, Riverside (Mrs. Ellman) spoke powerfully about the sector's contribution to social enterprise in her constituency and area. My hon. Friend the Member for Sheffield, Heeley (Ms Munn) spoke interestingly about care services and added greatly to my knowledge of the sector. She reinforced the benefits of the co-operative model for that sector.
	May I tell my hon. Friend the Member for Leigh (Andy Burnham) that I look forward to my name being used in football chants, although I suspect that I may have to wait some time for that? He rightly drew attention to the importance of the sector in football and the reasons why it is relevant to the football community, which is all too readily dominated by wealthy people with short-term interests. Finally, I thank the Minister for her careful but positive response to the Bill. I look forward, if the House wills it, to debating many of the issues raised this morning in Committee. I very much hope that the House will give the Bill a Second Reading.
	Question put and agreed to.
	Bill accordingly read a Second time, and committed to a Standing Committee, pursuant to Standing Order No. 63 (Committal of Bills).

Company Directors' Performance and Compensation Bill

Order for Second Reading read.

Gareth Thomas: On a point of order, Mr. Deputy Speaker I beg to move, That the House sit in private.

Question put forthwith, pursuant to Standing Order No. 163 (Motion to sit in private):—
	The House divided: Ayes 0, Noes 23.

Question accordingly negatived.
	It appearing on the report of the Division that 40 Members were not present, Mr. Deputy Speaker declared that the Question was not decided, and the business under consideration stood over until the next sitting of the House.

Archie Norman: On a point of order, Mr. Deputy Speaker. Is it in order for Labour Members to use a parliamentary device to kill a Bill that has widespread support from all parties, simply because the Government are embarrassed to hear the case against compensation for company directors who have failed in their role? They have taken no action in the past and hope that, by obscuring debate, they can take the matter off the table and ensure that their inactivity receives no press attention.

James Gray: Further to that point of order, Mr. Deputy Speaker. Is not it extraordinary that about 30 or 40 Labour Members are in the Chamber and have chosen not to go through the Division Lobby? By that strange device, under the Standing Orders of the House, they have allowed the Bill to fall. If we were in a Standing Committee, the number of people present would be counted, not the number of people who voted. Should not the Procedure Committee examine that?

Patrick Cormack: Further to that point of order, Mr. Deputy Speaker. Is not there a convention in the House that the vote and the voice should go together? Is not it slightly extraordinary that no one voted in the No Lobby having shouted?

John Bercow: Further to that point of order, Mr. Deputy Speaker. If none of the interpretations offered by my hon. Friends the Members for Tunbridge Wells (Mr. Norman), for North Wiltshire (Mr. Gray) and for South Staffordshire (Sir P. Cormack) is correct, the only remaining possible explanation is that a number of hon. Members who came this far with the intention to vote were somehow physically prevented from entering the Division Lobby, to which problem we would obviously need to attend.

Mr. Deputy Speaker: I understand the disappointment of the hon. Member for Tunbridge Wells (Mr. Norman) in the circumstances, but nothing out of order has taken place. If hon. Members are dissatisfied with any aspects of the procedures of the House, there are opportunities for pursuing that. I am sure that the hon. Member for Macclesfield (Sir N. Winterton), as Chairman of the Procedure Committee, would always be willing to entertain approaches for matters to be examined by his Committee.

Eric Forth: On a point of order, Mr. Deputy Speaker. Given the turn of events, which must have taken many hon. Members who are in other parts of the parliamentary estate watching what is happening by surprise, will you consider suspending the sitting briefly to give them time to attend the next debate? They will have assumed, in all reasonableness, that the debate on the Bill promoted by my hon. Friend the Member for Tunbridge Wells (Mr. Norman) would have taken some time. Surely in fairness, given what has just happened, a brief suspension of the sitting is in order to allow colleagues to gather themselves properly for the next debate.

Mr. Deputy Speaker: I should have thought that the right hon. Gentleman, who is punctilious in matters of attendance in the House, would expect the same standard to be observed by all hon. Members. Everyone is expected to know the Order Paper for the day and to make themselves available within the normal periods of time that the House allows for both Divisions and debates.

John Bercow: On a point of order, Mr. Deputy Speaker. Of course the interpretation of the rules that you offer is not to be disputed or contradicted in any way, but I wonder whether it might be courteous and germane to take account of the fact that, despite the unparalleled assiduity of my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth), he does have to trouble himself only to come in from a London residence in Kennington. Is the inclement weather not a relevant factor in the circumstances and might we not allow for it?

Mr. Deputy Speaker: Of all the matters of which the Chair has to take account, inclement weather is the least of them. Indeed, it might be said that some hon. Members are closer to the parliamentary estate than they might otherwise have chosen to be, with constituency duties in mind.

Health and Safety at Work (Offences) Bill

Order for Second Reading read.

Lawrie Quinn: I beg to move, That the Bill be now read a Second time.
	May I extend my thanks to the House for allowing me this privilege today? The Bill's purpose is self-evident in its title. If it is successful, it will have an impact on every workplace, not only in my region, but across the rest of England, Scotland and Wales. It would also influence the best safety practices in Northern Ireland.
	My message is simple and I am sure the House will agree that it is common sense. Anyone who breaks safety law should pay for that breach. Parliament has responded to the changes in workplaces over the past 30 years since the introduction of the Health and Safety at Work, etc. Act 1974.
	I hope to explain in a nutshell the Bill's principal provisions. It seeks to raise the maximum level of fines for most health and safety offences to £20,000, thereby allowing for more fines to reach that level. It also makes it possible to imprison employers for the most serious offences, and raises the fine for not being properly insured. If these measures receive the support of Parliament today, I hope that the Bill will then receive a fair wind and become law by the autumn.

John Bercow: I take account of what the hon. Gentleman says about the ambition to increase fines and to provide for the possibility of imprisonment in the most serious cases. It is obviously incumbent on him to take account of the likely impact of that proposal. Can he tell the House what assessment he has made of the likely effect on prison overcrowding of the Bill's provision for imprisonment?

Lawrie Quinn: I am grateful to the hon. Gentleman for that intervention. He anticipates the next phase of my speech, and if he will allow me to continue I shall speak not only from my professional experience in these matters, but from the perspective of my region of Yorkshire and the Humber.
	In doing so, I should like to begin by reviewing aspects of the health and safety record in my region. In the past three and a half years, 29 employers in Yorkshire and the Humber have had to pay fines of more than £20,000. As the published record of the Health and Safety Executive shows, only 10 of the 291 criminal convictions for health and safety offences in my region between 1 April 1999 and 1 December 2002 resulted in fines of £20,000 or more. Most of the convictions led to fines of less than £5,000, which is why it is time for the level of fines and the tariff in the primary legislation to be examined, revitalised and increased significantly. This legislation is some 30 years old, and it is about time that Parliament attended to its duty to revisit it.

John Bercow: I am extremely grateful to the hon. Gentleman for his generosity in giving way again. Punishment for breaches of the kind that the Bill is designed to address should certainly be condign, but has he based the intended fines on the increase in the retail prices index in the past 20 years, or has he used a factor such as company turnover as his guiding criterion?

Lawrie Quinn: Again, I am grateful to the hon. Gentleman; one would almost think that he has helped me with my speech, because I am coming on to those matters, too. If he will show some patience and allow me to progress, I will willingly deal with any interventions that he cares to make. If he examines the issue, he will doubtless discover that workplaces in his own region of the south-east have a similar record and experiences.
	In Yorkshire and the Humber, 19 of the top 29 fines were for accidents resulting in fatalities. Tragically, they included the death of one child, so these are very serious matters that I am rightly bringing to the House's attention. Other offences resulting in prosecution involved amputations, paralysis below the neck, serious electrocutions, bad burns and the exposure of workers to fatal asbestos fibres. Regrettably, the latter issue, which the House considered recently, is a particular problem in my region.
	Eight of the top 10 fines, four of which were for incidents resulting in fatalities, were for exactly £20,000. That begs the question: what value a life? The highest fine in the region was £400,000; regrettably, it was for a fatal electrocution.
	In my constituency, there have been only six convictions during the three and a half year period of my research, with penalties ranging from a fine of £5,000 to a conditional discharge. As the people responsible for these important health and safety issues, we are giving the wrong signal.

Eric Forth: The hon. Gentleman seems to imply that one of the problems is the low rate of conviction, which is a different matter from the penalties that can be imposed on conviction. Will his Bill do anything to raise the number of convictions, or is his interest solely focused on penalties? If the conviction rate is a problem, can something be done about it?

Lawrie Quinn: I thank the right hon. Gentleman for that intervention. My purpose is simple: to tell the whole country that Parliament takes these matters seriously. The measure is about prevention and ensuring a correct workplace culture for everyone—from the operative on the shop floor or the site to the top person in the company. I want to demonstrate that Parliament is conscious of all the problems and wants a safety culture that is upheld with due consideration across the board. The current legislation has been in force for 30 years and, as I continue with my speech, I shall explain some of the reasons that it is time to revitalise it.

Henry Bellingham: I note the hon. Gentleman's point about updating the law, which is in some cases more than 100 years old. Why, however, does he want to amend section 40(9)(d) of the Explosives Act 1875? Is that really necessary?

Lawrie Quinn: I am especially pleased that the hon. Gentleman has made that intervention. His record in the House, as demonstrated at many Question Times, is proof of his interest in these matters. As he will recall, I wrote to him asking if he would act as one of the Bill's sponsors; regrettably, he did not reply positively. I am conscious that he takes these matters seriously and I commend him for that. If he will bear with me as I develop my speech, I hope that he will find that his intervention has been answered.
	I commend the excellent work done day in, day out by health and safety inspectors not only in my region but throughout the country. My previous professional experience showed me that in the vast majority of workplaces there is a real sense of partnership between the inspectorate, employers, employees and trade unions and that they continue the fight against complacency, bad practice and neglect. As I know only too well, if all those dominoes of ignorance fall over at once, it can lead to serious accidents and, tragically, the fatalities that I have frequently encountered.
	I have reached the point in my speech that covers the question of the hon. Member for Buckingham (Mr. Bercow), who, unfortunately, is no longer in his place. As part of my preparation for the Bill, I conducted many face-to-face interviews with key stakeholders in industry, including discussions at Congress house with Mr. Owen Tudor, who is recognised nationally as a champion of health and safety policy. I am also especially grateful to one of the unions for my own industry—the railway industry—the Transport Salaried Staffs Association and its general secretary, Richard Rosser, for his personal support in encouraging me to pursue my Bill.
	The House may be pleased to know that my concerns were spurred on by direct contact with my constituents. People came to my surgeries and wrote to me to explain their deep anxiety about the matters that I want to address in the Bill.

George Osborne: I am grateful to the hon. Gentleman for his generosity in giving way. He talks about consulting various organisations. Has he consulted employers' organisations, such as the CBI and the Federation of Small Businesses? There is a risk the Bill would have a regulatory impact on businesses and that they might go out of business.

Lawrie Quinn: I commend Opposition Members on anticipating the direction of my speech. The hon. Gentleman may be pleasantly surprised by what I am about to say.
	I have had contact not only with people from my own industry and construction, but with the CIA—not the organisation that those initials suggest, but the Chemical Industries Association. I am pleased to be serving on a fellowship with the Industry Parliament Trust and Degussa—a well-known, internationally respected chemicals company. I am particularly grateful to Dr. David Campbell of Degussa for his good common sense and advice about issues that affect the chemical industry across Europe. Along with others in construction, insurance and other major employers, he has urged Parliament to take action.
	The hon. Member for Tatton (Mr. Osborne) asks me about the Federation of Small Businesses. On 3 January this year, I met the chairman—I forget his actual title—of the Yorkshire and Humberside regional federation of small businesses and I outlined the Bill's provisions. Those conversations helped me to prepare and draft some of the provisions.

James Gray: Will the hon. Gentleman give way?

Lawrie Quinn: Will the hon. Gentleman please allow me to continue? I have often seen those on the Front Bench take lots of interventions, and I think that I have taken 80 per cent. If he will bear with me, what I am about to say may answer his question.

James Gray: rose—

Lawrie Quinn: Let me have a go at answering before the hon. Gentleman asks the question.
	Again, on 3 January, I met Mr. Tony Cherry of the Federation of Small Businesses, and I was able to raise the wide range of concerns of small businesses not only in my constituency, but across the region. The House will know that the Federation of Small Businesses deserves respect and needs to be commended on the very important work that is does in helping its members. I am a big fan of what it does locally in my constituency. Many small businesses in the Yorkshire and the Humber region benefit from its work.
	However, the House needs to understand what the federation in my region tells me. Admittedly, I have not spoken to it at national level, but it should be borne in mind that I am private Member and that I have access on that level. The federation has told me that the vast majority of small businesses attend to their business in a very safe manner, but, like me, it is concerned about those businesses that do not meet the current legal provisions.
	The House will be horrified to hear that there are many instances where people are not adhering to the current law on employers' liability insurance, simply because the premiums that insurance companies require have grossly increased compared with the value of the fines and penalties under the existing 1974 legislation. The hon. Member for North-West Norfolk (Mr. Bellingham) will know about that, as he has asked a question on that very subject.
	Anyone with any common sense will realise that a provision that is 30 years old needs to be revitalised. That is why I have introduced the Bill. On the point raised by the hon. Member for Tatton, I certainly believe that small businesses in my part of the world agree with what I am trying to do.
	Let me take this opportunity briefly to commend the Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Edinburgh, South (Nigel Griffiths), who is responsible for small business—and whom Mr. Cherry also commended strongly—on the pilot grant scheme for small firms to cover the costs of health and safety training. Along with many other colleagues, I am pleased to endorse the Federation of Small Businesses' campaign for the provision of 100 per cent. tax relief for capital purchases intended to increase protection and reduce risks at source within the workplace. The time has come for Parliament to respond to that agenda. Two years ago, the Deputy Prime Minister, after consultation across industry, recognised that agenda in his document on revitalising safety in the workplace, which I have used as a source for this Bill.
	Let me say a brief word on the concerns about human rights, on which the hon. Member for Buckingham touched. I have every confidence—those to whom I have talked in industry have given me that confidence—that the Bill would not affect the compatibility of the Health and Safety at Work, etc. Act 1974 with the European convention on human rights. A reverse burden of proof provision such as section 40, to which I think the hon. Member for North-West Norfolk referred, may offend against the presumption of innocence in article 6.2 of the convention.

Edward Leigh: Will the hon. Gentleman give way?

Lawrie Quinn: I am sure that the hon. Gentleman will understand that I wish to continue.
	Recently, however, the Court of Appeal examined section 40 and concluded, on the basis of a number of compelling factors, that it represents a fair balance between the rights of the individual to a fair trial and the protection of life and limb from dangerous work practices.

John Bercow: Will the hon. Gentleman give way?

Lawrie Quinn: I have already been generous in giving way to the hon. Gentleman.
	In conclusion, I hope that the House will respond to the national disgrace of 28,000 serious accidents each year and, tragically, 300 fatalities each year as a result of health and safety breaches at work. That means that one worker dies on our sites every working day. That is a national disgrace, and it is about time that Parliament tended to it. I hope that the House will give my Bill a Second Reading.

Mark Hoban: The hon. Member for Scarborough and Whitby (Lawrie Quinn) made some important points about health and safety. It is clearly a matter of concern to employers and parliamentarians that proper safeguards are in place to ensure the health and safety of employees.
	One of the issues that employers have raised with me in the past 18 months has been the level and volume of health and safety regulations, and there is some concern about their complexity. The Bill would increase the penalties incurred by an employer who breached the regulations. In preparing for the Bill, the hon. Member for Scarborough and Whitby consulted the construction industry and the Chemical Industries Association—complex and dangerous industries unless the correct safety procedures are in place. I know how important health and safety is to members of my family who are involved in the construction industry, and how important it is to the way in which sites are run and projects managed and the safeguards that they put in place.

John Bercow: I am sure that my hon. Friend will agree that we should legislate not in anger but on the evidence. Can he tell us something about the increasing incidence of offences that formed the evidential base on which the review of the current penalty maximums was conducted by the Home Office, the then Department of the Environment, Transport and the Regions and the Health and Safety Executive between February and September 1999?

Mark Hoban: I thank my hon. Friend for his comments, but I suspect that he may have an opportunity to elaborate on that evidence himself later on, for the benefit of the House. That evidential base was indeed an omission from the speech of the hon. Member for Scarborough and Whitby. He simply said that the Bill was a good thing rather than explaining it fully. Given the way in which the Bill promoted by my hon. Friend the Member for Tunbridge Wells (Mr. Norman) was killed off earlier, he had plenty of time to give a full explanation.

John Bercow: I have the highest regard for the hon. Member for Scarborough and Whitby, and I respect his intentions in promoting the Bill, but my concern is not that he did not want to develop the evidential premise for the provisions but that one or two of his colleagues, for their own reasons, were not keen that he should do so.

Mark Hoban: Perhaps the hon. Member for Scarborough and Whitby can tackle that valuable point when he winds up.

Eric Forth: Perhaps my hon. Friend would say a few words about whether he shares my disappointment that the promoter of the Bill did not provide more evidence of international comparisons, in which I have always thought that we have an exemplary health and safety record. Surely we should have international, as well as domestic, sector-by-sector evidence.

Mark Hoban: My right hon. Friend makes an important point. British industry is indeed perceived as having a good health and safety record. Is it fair to increase the penalties here, when our businesses are competing internationally? My understanding is that, in order to change the penalties, it is necessary to amend the European Communities Act 1972, which perhaps makes it all the more important to understand the international comparisons behind the Bill.

Edward Leigh: It is unfortunate that the promoter was clearly told to sit down. This was his big day, and he could at least have been allowed to develop his case. I am confused about why these changes are being made by way of a private Member's Bill. After all, the Government amend fines all the time, often as an adjunct to a Government Bill. What does my hon. Friend think is the provenance of this Bill? Is it a Government handout? Surely the point of a private Member's Bill is to progress some great private issue of interest to the promoter.

Mark Hoban: I am grateful to my hon. Friend for raising that point. On the cover of the Bill, we are told that the explanatory notes were provided by the Department for Work and Pensions, so perhaps, to use an unparliamentary expression, it is indeed a handout. The hon. Member for Scarborough and Whitby perhaps gave the game away towards the end of his speech when he referred to the review that the Deputy Prime Minister initiated in the early years of the last Parliament, which produced the recommendations that the Bill puts into effect.
	I wonder where the Government's priorities on legislation lie. I would have thought that the Deputy Prime Minister, a man of some weight and stature in the Labour party—both metaphorically and literally—would have been able to find time in the Government's legislative programme, which certainly was rather light in content last year, to introduce a Bill such as this. Indeed, the provisions could have been introduced by way of statutory instrument. The hon. Gentleman might explain why that was not so, but he is clearly not interested in responding.

James Gray: The hon. Member for Scarborough and Whitby (Lawrie Quinn) has a great personal interest in the railways and a distinguished history of speaking on behalf of the industry before he entered the House. Is not it disappointing, therefore, that the Government have given him this thin little Bill rather than allowing him to take up one of his interests, such as the railways?

Mark Hoban: I am grateful to my hon. Friend for making that point. I have heard the hon. Gentleman wax lyrical on many subjects. I have heard him speaking in European Standing Committee A on the fishing industry. His interests in the railway industry are well known. Indeed, he cited it as a source of inspiration for the Bill. How significant that inspiration is compared with that which he found in the Department for Work and Pensions, I do not know. Perhaps he could clarify that.

Lawrie Quinn: In 19 years of working in the railway industry I was responsible for jobs that, sadly, resulted in six fatalities. I mean it most sincerely when I say that I promise everyone in the House that if they had to attend the funerals and become involved in the inquiries and the human pain and suffering as a result of an accident at work, they, like me, would be passionate about safety. It is for those private reasons, and owing to issues in the fishing industry and others that I cited, especially the construction industry, that I have promoted this Bill. I cited the industries that are getting it right, but through the Bill I am trying to encourage those that are not committed to health and safety in the way that I believe I am.

Mark Hoban: I am grateful to the hon. Gentleman for that intervention. From personal experience, he has demonstrated why the Bill is important and so dear to him. All those who as employers had responsibility for their staff will share the concern that he has shown by promoting the Bill.
	I was referring to the hon. Gentleman consulting employers in sectors of industry where employees are at great risk. I know from talking to employers in my constituency that there are problems not just in manufacturing but in construction and distribution. A number of employers in white-collar businesses have complained about the level of health and safety regulation and the need to introduce it in accountancy firms, for example. The issue of risk assessment and the level of regulation required are of deep concern to them. My concern—perhaps we can explore this in Committee—is about the higher penalties applying to businesses in which risk is limited but which, through some slip in understanding the complexities of health and safety regulations, inadvertently breach the rules.

Lawrie Quinn: indicated dissent.

Mark Hoban: The hon. Gentleman shakes his head. Perhaps he would like to explain.

Lawrie Quinn: I believe that a good employer has nothing to fear from health and safety legislation. It is those who do not adhere to such provision—the so-called cowboys—whom I am trying to encourage to change through my Bill. It is extremely important to recognise that good employers have nothing to fear from the Bill. They will find that it is good for their staff, good for their business and, in the long run, good for the development of their company.

Mark Hoban: The hon. Gentleman makes an important point, but one that slightly misses the mark. The problem for many employers is that the rules are so complex and the changes to them so frequent that any breaches that they inadvertently commit are due to that complexity, not to whether they are good or bad employers. It is important that the House understands that and takes note of it, because if employers breach regulations by mistake they will be subject to a regime that is much tougher than it was before, and there is a risk that they will be unfairly penalised for mistakes that were not their fault.

John Bercow: The hon. Member for Scarborough and Whitby (Mr. Quinn) has, rightly, emphasised that it is the cowboys who are his target, but I hope that my hon. Friend the Member for Fareham (Mr. Hoban) agrees that that fact does not obviate the need for a proper debate about the nature and extent of the condign punishment that offenders should suffer. Given that the prison population—a matter to which I animadverted earlier—is projected to rise from approximately 72,000 now to between 99,000 and 109,000 by 2009, do we not need to know what the likely impact of this well-intentioned Bill would be on prison overcrowding?

Mark Hoban: Yet again, my hon. Friend makes a telling point. It is interesting that paragraph 17 of the explanatory notes to the Bill states:
	"There are no significant public expenditure implications. Making imprisonment available for more health and safety offences is expected to lead to a minimal increase in the prison population."
	One has no reason to doubt that assertion, but at a time when the prisons are under pressure in terms of population, and when that pressure appears—at least to those of us who do not have a legal background—to have triggered demands by the Lord Chief Justice to stop imprisonment for most type of burglary, which should relieve the pressure, it seems odd that the Bill might lead to additional overcrowding pressures in prisons. If under this provision persons who commit a health and safety offence are to become liable to imprisonment, one wonders whether the Government believe that the provision is unlikely to be used and is therefore of minimal benefit; and, if that is the case, one wonders why the provision appears in the Bill.

John Bercow: I am sorry to trouble my hon. Friend unduly, but does he agree that the Bill appears to be flawed on one or the other or both of two counts? Either the Bill is guilty of a lack of transparency or honesty in the intended sentencing policy, because it provides for imprisonment without the intention that effect will be given to that provision; or it is based on a calculation of the likely deterrent value of the new sentences, in which case we need to know on what basis—what evidential yardstick or international comparison—the promoter's confidence about the deterrent effect is founded.

Mark Hoban: On the first point, the question is: if there is to be a sanction, will it be used? On the second point, if there is no expectation that the Health and Safety Executive will use the sanction, will it ever act as a deterrent? If it is not intended to use the sanction, there will be no deterrent. If it is intended to use it more widely, the financial implications of the Bill for public expenditure are rather greater than the explanatory notes suggest. [Interruption.] The Minister for Work says that we must be kidding. When he replies to the debate, I am sure that he will answer the valid points made by my hon. Friend the Member for Buckingham (Mr. Bercow) about the use and effectiveness of the sanction.
	I have devoted most of my speech to discussion of health and safety offences and the punishments that will be brought into effect if the Bill becomes law. Opposition Members have expressed concern about the nature and purpose of the sanctions outlined in clause 1. I am sure that we shall return to that point in Committee, because it is important to ensure that the true purpose and intent of the clause are well known to employers and to the Health and Safety Commission, which will be responsible for putting the Bill into effect if it becomes law.

Edward Leigh: My hon. Friend speaks for the Conservative party this morning, which traditionally speaks for business. Will he outline what the Bill will cost business, any burdens that it might place on business and whether those on the Conservative Front Bench therefore have anything to say on these subjects?

Mark Hoban: My hon. Friend is tempting me down a route that even the Government probably have not explored fully—the Bill's impact on business.

Eric Forth: I might be able to give my hon. Friend some help. He knows, because he studied them closely, that in the explanatory notes, which are a very fertile field of information on the Bill—quite a lot of it rather controversial—item 19 says, incredibly:
	"The Bill will not impose new requirements on business."
	Even if the Government have failed to make any proper impact assessment, and say that there is no need for one, do not our joint and collective knowledge of business, and our instincts, tell us that it is bound to add a burden if it is going to have any effect at all?

Mark Hoban: My right hon. Friend, with his usual incisive powers in looking at legislation, makes a very valid point. I know, from my own experience of looking at regulatory impact assessments, that often they are incomplete or ill thought-through. If the Government are saying that no such assessment is needed in this case, I do wonder whether they have looked at the matter fully. My right hon. Friend is right: if the Bill is passed, employers will review their procedures. It will provide fertile employment for human resources consultants and safety consultants, who will point out to businesses that these punishments have been introduced, and that the liabilities that they will face are much steeper than they were previously.

John Bercow: Will my hon. Friend give way?

Mark Hoban: Will my hon. Friend bear with me? I have given way to him several times already and I will of course give way to him imminently, but I want to finish this point.
	The Bill will provide a sales pitch for health and safety consultants throughout the country. They will tell employers, "We must look again at your health and safety procedures, because you do not want to go to jail." Even those employers who are comfortable with their existing health and safety procedures will feel under considerable pressure to accept the blandishments of health and safety consultants who are using the Bill—

Lawrie Quinn: indicated dissent.

Mark Hoban: The hon. Gentleman shakes his head, but I have learned from talking to employers in my constituency that often nothing will open their cheque book more easily than the threat of sanctions or penalties. Good employers, not only bad ones, will feel the impact. I worry that the legislation will be used unscrupulously by some consultants, which no Member intends, to generate more business and cause businesses to incur additional costs. I am grateful to my right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) for raising that valid point because it is important to place on the record that we must be wary about the use to which the Bill will be put by consultants.

John Bercow: I am grateful to my hon. Friend for giving way. That last point is especially applicable to small firms, which typically do not have in-house legal, finance or personnel departments and will therefore be required to seek and pay for outside consultancy advice. Given that 99.6 per cent. of companies in the UK employ fewer than 100 people and that those companies generate approximately two fifths of our national output and employ more than 50 per cent. of the private sector work force, are these not relevant matters that must be taken into account in our deliberations?

Mark Hoban: My hon. Friend, as ever, makes a telling point, particularly about the impact of regulation on small businesses. It came as a surprise to me, having worked in the large corporate sector before coming to the House, that when I looked at an analysis of businesses in my constituency I found that very few of them—only 30 or 40 organisations—employed more than 50 people. The rest were small businesses, many with fewer than 10 employees. My concern is, as ever, about the impact of legislation on businesses. What pressures arising from the Bill will they need to reflect in their own procedures and what additional costs will they bear?
	Clause 2 deals with employers' liability insurance, which is of great concern to employers up and down the country. The British Insurance Brokers Association claims that 500 small and medium firms went out of business in 2002 because of a sharp increase in employer liability premiums and that a further 10,000 are at risk. In trying to understand the reason for increased premiums, many commentators have referred to the growing compensation culture, the sense that the litigation that we see as characterising the American legal system is creeping across to the UK and that employees, customers or passers by will sue if they suffer an injury that can be related back to a business or a Government body. Indeed, the compensation culture has had a dreadful impact on the health service.
	There has also been a rise in successful claims by staff injured at work. Each year, 30,000 people are seriously injured in the workplace. Another consideration is the impact of asbestos-related claims. Three or four months ago, I remember my hon. Friend the Member for Buckingham making a very measured and thoughtful contribution on the impact of statutory instruments on asbestosis. Indeed, if he catches your eye, Mr. Deputy Speaker, he will be able to relate that experience to the Bill that we are considering today.
	Insurance companies also refer back to the impact of 11 September, which resulted in many of them suffering large claims. It brought a greater appreciation of the risk that companies suffer from terrorist and other activities, which has led to an increase in insurance premiums.
	Another factor is the stock market slump. Many insurance companies invest the proceeds of their policies in bonds and equities as a way of reducing the cost to businesses as they set aside a reserve for claims. That money is invested and it is assumed—or hoped—that the investment value of the reserves will increase. The increase is used to offset the cost of insurance to employers as well as to householders, car owners and so on. The downturn in the stock market in the past fortnight, when there were 10 consecutive days of falls in the FTSE 100, was a historic occasion and indeed a sad one for those with pensions or investments in the stock market. It will have made the financial pressures facing the stock market even harder. This week, there was a severe markdown in the share price of one insurance company because there were unwarranted concerns about its solvency. Insurance companies are working in a difficult market, and consequently premiums for employers liability insurance have increased. Aon, the world's second largest insurance broker and a major employer in this country, said in a survey published in December that many firms' premiums had doubled in the past 12 months. It also suggested that premiums are set to rise by a further 15 per cent. in the current financial year.

Henry Bellingham: I thank my hon. Friend for giving way in his superb debut on the Front Bench. He talked about premiums doubling, but has he heard about a family-run steel fabrication business in the Deputy Prime Minister's constituency that has just made five people redundant and is likely to cease trading because its combined public liability and employers liability bill has increased from £3,600 to £28,000?

Mark Hoban: The scale of the increase that my hon. Friend has just outlined will, I am sure, trigger a request for clarification from the Hansard reporters, as it seems beyond belief that a company can face such an extensive increase in its premiums. That highlights the problems that businesses face as premiums go up. Some employers will decide to reduce the scale of their operations, as the steel fabricator in the Deputy Prime Minister's constituency has done, by reducing the number of employees. However, some employers will make an ill-judged if well-intentioned decision not to cause hardship among their employees and will avoid those huge increases in premiums by not paying them. That is a regrettable decision, and I do not believe that businesses should make it. If they are interested in the long-term welfare of their employees, they need to ensure that liability insurance is in place, and should not base their decision on short-term financial gain.
	Employers face difficult decisions. Faced with that trade-off, should they make staff redundant or cancel their employers liability insurance? People who cancel their insurance will be caught by the Bill's provisions.

James Gray: The conundrum that my hon. Friend has described particularly affects the stone-quarrying industry in many parts of England, including my constituency. Employers will not lay people off, but they cannot pay the higher premiums. Many of them are seeking to set up a co-op and become joint owners of a business to try to see the problem off, but that means that they are not paying insurance and are taking on the risk themselves, rather than giving it to the company. Does my hon. Friend not agree that that too is regrettable?

Mark Hoban: My hon. Friend has raised an important and worrying issue for businesses and their employees. Business pressures are forcing employers to look at measures such as setting up co-operatives or cancelling their liability insurance, which will lead to a dangerous trend in the insurance market. I am grateful to my hon. Friend for bringing that issue to the attention of the House.
	Hon. Members have spoken about problems that they have encountered in their constituency or that they are aware of through their business contacts. The Engineering Employers Federation released details last December of its experience. Many of its members have faced premium increases of up to 300 per cent. in the past year. In August 2002, the BBC's online service published an article entitled "Insurance woes hit small firms". It highlights the risk to which I referred earlier and claims that because of rises in premiums, many firms continue to trade without cover, in contravention of UK law.

Henry Bellingham: The Under-Secretary of State for Trade and Industry, the hon. Member for Edinburgh, South (Nigel Griffiths), told the House on 5 December that the Government had set up a comprehensive review of the matter and would report to the House. As the Minister for Work is present today, would it not be in everyone's interest if he made a speech—quite a long speech, we hope—telling us how that review is going?

Mark Hoban: I am grateful to my hon. Friend for raising the matter. With his usually prescience, he highlights the point that I intended to raise next. I am concerned that the provision will have an impact on employers liability insurance. I believe that we should consider the matter carefully and wait until the Department for Work and Pensions has reviewed employers liability insurance and see the conclusions that it has reached. The House should not act precipitately.

Nick Brown: I welcome the hon. Gentleman to his Front-Bench responsibilities. It is a delight to see him at the Dispatch Box. I will make a deal with him. If Conservative Members do not talk out the Second Reading of the Bill today, I will serve on the Standing Committee that considers the Bill and we can have a comprehensive discussion of these important matters relating to employers liability insurance. In Committee there will be a chance to question me, not just on issues of principle, but on issues of detail. That is a very fair deal.

Eric Forth: The Minister did not make such an offer on the previous Bill.

Nick Brown: If the hon. Member for Fareham (Mr. Hoban) will allow me to take an intervention—

Mr. Deputy Speaker: Order. To keep ourselves in order, the Minister ought to let the hon. Member for Fareham (Mr. Hoban) respond to his intervention, before he responds to the next one.

Mark Hoban: Thank you, Mr. Deputy Speaker, for your protection. As hon. Members have remarked, it is my first occasion at the Dispatch Box, so I am grateful for your direction to ensure that we remain in order.
	We would all welcome a detailed explanation and discussion of the Bill in Committee, but it is important that we debate the issue in full on the Floor of the House before we proceed to Committee stage. Only a limited number of hon. Members can serve on the Committee, and the Bill is clearly of interest to a large number of hon. Members, especially Conservative Members. We need to explore the issues in full. I will allow the Minister to intervene again.

Nick Brown: I am grateful to the hon. Gentleman for giving way. He makes a perfectly fair point. I would be happy to return to these matters, either by giving a full report to the House on our review of employers liability insurance later in the spring or early summer, or at the Report stage of the Bill.
	The shadow Leader of the House seemed to suggest in his sedentary intervention that talking the Bill out was a quid pro quo for the previous business not being quorate. May I gently say to the right hon. Gentleman and the rest of the House that it is always open to the parliamentary Conservative party to make sure that the House is quorate for business that the Opposition consider important.

Mark Hoban: Those of us who have been in the House this morning witnessed the way in which Labour Members used parliamentary procedure to stifle discussion of a Bill that some have characterised as an attack on fat cats. Perhaps it is all the more ironic that it was Labour Members who prevented discussion of that Bill. However, I am conscious that I would be deviating from order if I continued down that track for much longer.

James Gray: My hon. Friend has been most generous in taking interventions. Does he not find it extraordinary to hear a Minister of the Crown begging from the Dispatch Box for the Bill to be allowed to go through today and not be talked out, as he calls it? Of course we have no intention of doing that, as we have important things to say. Twice the right hon. Gentleman stood at the Dispatch Box, begging. If it is all that important to the Government, why do they not just make it a Government Bill?

Mark Hoban: My hon. Friend makes a valid point.

Eric Forth: A killer point.

Mark Hoban: My right hon. Friend is right. The Bill is about the protection of employees, but I point out that Labour Back Benchers—I would hate to think that the earlier use of a procedural device was inspired by the Government or the Labour party's usual channels—killed a Bill about the protection of shareholders, who are often workers who hold shares in their firms or pensioners. We have today had opportunities to talk about protection for different classes of people, but it is disappointing that one of them has been quashed.

Nick Brown: That is not true. Employers operating legitimately are protected by the penalty regime. The penalties fall only on those who have been taken to the courts for cheating.

Mark Hoban: Without wishing to engage in a ding-dong about this particular aspect of the Bill, I point out that when we discussed the Bill previously, it was seen as a deterrent. It was seen not as protecting employers, but as beating them around the head if they failed to comply.

John Bercow: My hon. Friend is developing his arguments powerfully, but does he agree that this debate has a lop-sided character? If the hon. Member for Scarborough and Whitby had been at liberty properly and in detail to defend some of the excellent arguments that I think he had intended to develop and had not been subject to the selfish parliamentary thuggery of the hon. Member for Hendon (Mr. Dismore), who is now noticeably absent from his place, many of our concerns might have been allayed at a much earlier stage in the proceedings. The hon. Member for Hendon is guilty as charged.

Mark Hoban: My hon. Friend's intervention requires little or no answer from me.
	Before we were diverted briefly into discussing protection of different classes of people who work for the same firm, whether they are employers, shareholders or employees, we were discussing employers liability insurance. Clause 2 increases the penalty for employers who do not have employers liability insurance. I explained why there are pressures in the insurance market that have resulted in employers ceasing to hold such insurance. My hon. Friend the Member for North-West Norfolk (Mr. Bellingham) pointed out that the Department for Work and Pensions is reviewing the matter. The Minister for Work said that at a later stage he would expand on the results of the Government's review, but I was disappointed when he said that the results would be available in late spring or early summer. Given the increase in employers liability insurance that people in the insurance sector are predicting, it is clear that, as a result of higher premiums, a great many more businesses will go out of business, more employees will be laid off and more employers might be tempted to take the foolish route of ceasing to have such insurance.
	It would be better for the Government to release the results of the review sooner so that we can see whether the increased penalties that the Bill sets out for those who do not hold employers liability insurance are appropriate, given the current market conditions. It is not only the Government who are inquiring into employers liability insurance; I understand that the Office of Fair Trading is engaged in a similar review. It is important to wait for the results of both those reviews. Given the importance of employers liability insurance to employees and employers, I wonder whether a private Member's Bill is the appropriate vehicle for tackling the subject.
	I want briefly to refer to a couple of other clauses. I am conscious that Conservative Members want to participate in the debate; I do not know whether that applies to Labour Members. The hon. Member for Scarborough and Whitby did not mention proposed new section 5(4) of the Employers' Liability (Compulsory Insurance) Act 1969, which clause 2 would introduce. It reconsiders the time for bringing a prosecution for breaches of health and safety rules. Currently, a prosecution can be brought within six months of the offence occurring. The Bill would change that rule and provide that such an offence could be tried
	"within the period of five years beginning with the date on which the offence is alleged to have been committed, and . . . within the period of six months beginning with the date on which evidence sufficient in the opinion of the prosecutor to justify the proceedings comes to his knowledge."
	That is a significant change.
	The explanatory notes claimed that the Government would incur no additional financial cost. However, I wonder about the impact of the change. I am worried that employers and the Health and Safety Executive might be exposed to a series of vexatious claims by employees, who would know that they had a longer period in which to claim and might think up opportunities to do that, not through interest in their well-being but to create a problem for the employers. One can imagine, for example, an employee who had been dismissed thinking back to an incident that took place three, four or five years ago and bringing it to the attention of the HSE. The clause could be used to take up a case with the HSE, which would need investigation by the inspectorate and require employers to go through their records and spend time appointing a solicitor, taking legal advice and perhaps employing one of the health and safety consultants to whom I referred earlier.
	The Bill provides a window of opportunity for a backlog of claims.

John Bercow: I do not want to be unduly troublesome or question my hon. Friend's motives. We all understand the danger of vexatious claims, against which the House should guard. However, will my hon. Friend take great care not to give the unworthy and untrue impression that Conservative Members tolerate wrongdoing? We recognise that, even if something happened a long time ago, it should be investigated. I refer my hon. Friend to the statute of limitations, which typically covers a period of not five but six years.

Mark Hoban: As ever, my hon. Friend makes a valuable point. It is right to provide protection in law and to ensure that any wrongdoing can be rectified and that those responsible can be punished.
	I used the example of someone who had been dismissed from a company using the Bill to make a vexatious claim. One could present the contrary view. Unscrupulous employers, to which the hon. Member for Scarborough and Whitby referred, might apply pressure to employees. They could say, "We do not want you to raise this matter with the HSE." Free from the contract of employment, the former employees could use the measure to right the wrongs that they believed were committed at a time when they did not feel able to bring the matter to the HSE's attention.
	As in all cases of extending a period for making a claim or reporting an offence, the provision is a double-edged sword. It should be explored in detail in Committee because we must ascertain the size of the potential backlog. We need to understand how the Health and Safety Executive would consider such claims. What standard of evidence would it require from the person who brings the allegation to it before initiating an investigation into an offence that may have taken place four or five years ago? It would be worth seeking advice from employers and the Health and Safety Executive on the level of burden that might be inflicted by the Bill's provisions.
	The five-year limit is within the limit set out in the statute of limitations, as my hon. Friend the Member for Buckingham said. The Committee should question whether five years is too short and six years is more appropriate, but that is a debate for another day.

Nick Brown: Serve on the Committee.

Mark Hoban: I am sure that there is gainful employment to be found for many colleagues in considering this important Bill.

John Bercow: Will my hon. Friend give way?

Mark Hoban: I will happily give way to my hon. Friend, but I hope that he is not exhausting his contribution to the debate by intervening so much.

John Bercow: I am alarmed by my hon. Friend's evident lack of confidence in me. I assure him that my fund is very far from being inexhaustible, but it has not yet been exhausted. To put it another way, there is still lead in the pencil.
	In addition to guarding against vexation, hon. Members on both sides of the House should be suspicious of arbitrariness. Has my hon. Friend reflected on the arbitrariness of the contents of clause 4, which says:
	"This Act shall have effect in relation to an offence committed or alleged to have been committed after the end of the period of two months beginning with the day on which this Act is passed"?
	Why two months? Why not one month, three months or four months? That is peculiar.

Mark Hoban: My hon. Friend demonstrates yet again that his contributions to such debates are inexhaustible. [Interruption.] The Minister encourages my hon. Friend to participate in the Standing Committee debates, and I am sure that he is contemplating that prospect as we speak.
	My hon. Friend makes an interesting point. I am sure that the parliamentary draftsmen recruited by the hon. Member for Scarborough and Whitby will have a good justification for choosing two months. [Interruption.] There seems to be an element of horse-trading between right hon. and hon. Members on both sides of the House on the period set out in clause 4. I do not think that that is a matter for Second Reading. It is perhaps better suited to a debate in Committee.
	Subsection (5) extends the Bill's provisions to Scotland and subsection (4) extends them to England and Wales. What about employees in Northern Ireland? Can the Bill be amended to extend that cover to fellow members of the United Kingdom in Northern Ireland? There is no reason why they should be denied the opportunity to benefit from the same protection that the Bill affords to people in Scotland, England or Wales.
	I hope that I have not trespassed too much on the good will of the House by speaking for nearly an hour on my first outing at the Dispatch Box, and apologise if I have done so. The Bill is important. Many people will follow its progress closely if it proceeds to Committee. It is an important Bill for employers and employees, and it addresses some important issues. However, I wonder whether it is appropriate for this Bill to be introduced in this state, and at a time when the Government and the Office of Fair Trading are looking at the availability of employers liability insurance in detail.

Vincent Cable: I share the slightly sad and frustrated approach to this legislation. This is clearly an enormously important subject to companies and to the work force, but, although I share many of the sentiments expressed by the hon. Member for Scarborough and Whitby (Lawrie Quinn) in his introductory remarks, the Bill is unsatisfactory for two reasons. The first is that a perfectly good and interesting Bill was bulldozed out of the way to make way for it. Secondly, as it stands it is neither one thing nor the other. It is too ambitious and far-reaching for a private Member's Bill, but it does not have the rounded sophistication of a full Government Bill.
	I am mystified as to why the Government have not introduced their own health and safety legislation, as I believe they undertook to do. For that reason, and although Conservative Members are talking at some length about the Bill, I hope that they will allow it to go to Committee, so that we can tease out the Government's intentions a little more. For example, I should be very happy to work with the Minister and Government Back Benchers to produce a clause on corporate killing. The Government have a clear manifesto commitment that they have yet to honour in that regard, and perhaps this is an opportunity to debate that properly.
	There are three elements to the Bill. The first I agree with, and it would be very useful: simply to increase the fines imposed by magistrates courts. They are far too low—ridiculously and insultingly low—and very out of date, and if the Bill were limited simply to dealing with existing offences and increasing fines appropriately, it would be a very useful addition to existing legislation, and I would fully support it. The second element is extending the scope of imprisonment. That raises big issues of legal principle and implementation with which there are serious problems. The third element, which deals with employers' liability, is irrelevant and fundamentally misses the point of why we have a problem with employers' liability.
	A useful starting point is the earlier intervention of the right hon. Member for Bromley and Chislehurst (Mr. Forth). He asked whether the problem with health and safety is really one of penalties, and the answer is no. Figures produced by the Health and Safety Executive itself suggest that only one in 10 of serious injuries are ever investigated, and that only one in 10 of those are ever brought to the courts. So we are dealing with the tiny fraction of very serious injuries at work that reach the judicial process, and focusing on the penalties for those misses the essential point: how do we strengthen the health and safety framework—one hopes in a non-bureaucratic way—to ensure proper prevention and investigation, and effective prosecution? Those are the links in the chain that we are not addressing.
	I shall deal with the three elements of the Bill in turn. As I have pointed out, an increase in magistrates courts' fines would be appropriate and I would support it, but what the hon. Member for Scarborough and Whitby did not mention is that when health and safety failures reach Crown courts, there are unlimited fines. So the question arises of whether it might be better to increase the scope for taking cases to Crown courts, rather than escalating fines in magistrates courts. We should consider jurisdiction as well as the level of fines.

John Bercow: The hon. Gentleman is being as constructive today as he always is, but does he not agree that, if we were to follow the route that he suggests, it would be necessary to consider the regulatory impact assessment? What would be the public expenditure implications of pursuing the route of the Crown court, rather than that of the magistrates court?

Vincent Cable: The entire Bill gives rise to the question of the regulatory impact assessment, and there are major regulatory implications and costs for business. It is not so much a public expenditure issue, but I agree that there are regulatory implications that clearly need to be properly evaluated and considered.
	I mentioned Crown courts in relation to the fines issue. Alternatively, an individual could pursue their claim with a civil claim. We need to consider both routes. However, I hope that the proposal in the Bill to increase the fines in magistrates courts survives in some form, as it is a worthwhile initiative.
	On imprisonment, I start from the same position as the hon. Member for Scarborough and Whitby. Health and safety is not dealt with in the same way as, for example, consumer protection or environmental offences, where it is much easier to obtain a prison sentence. A few years ago, the case of the Scottish butchers who produced beef in unhygienic conditions that was heavily contaminated with salmonella resulted in a prison sentence. It would be extremely difficult to get a prison sentence for health and safety breaches, even in extremely serious cases. It may be possible in principle, but only in cases where a company has actually breached an order rather than merely committed an offence. That needs to be tackled, but it should be done in the context of the extremely difficult issue of corporate killing, about which the hon. Member for Scarborough and Whitby is extremely knowledgeable due to his experience in the railway industry.
	I do not know why the Government have not pursued that important issue, as they promised to do, although there are obvious difficulties. How does one obtain the right standard of proof? How does one identify the responsible individual in an organisation? Is it the personnel director, the supervisor or the chairman of the board? None the less, it is unsatisfactory that we are not dealing with those problems as part of the reform of health and safety legislation.

Henry Bellingham: The hon. Gentleman is right to focus on that aspect. He will be aware of my interest in the Potters Bar train disaster which occurred approaching a year ago—the train was heading into my constituency. We are still waiting for the HSE report on that tragedy. There has been much speculation that charges of corporate manslaughter could be levied against the contractors, Jarvis. There is much uncertainty, so does the hon. Gentleman agree that it is time that the HSE published its final report? Furthermore, the Government really need to look into the situation as regards corporate manslaughter.

Vincent Cable: Indeed. The hon. Gentleman is right. I was making exactly that point. However, when pursuing such cases, the problem for the authorities is determining the individual—in Jarvis, in this instance—who would face prosecution. There is a difference between prosecuting an organisation and an individual. It is extremely difficult to identify the relevant person in an organisation; the Government need to address that issue, as it is not tackled in the Bill.
	The Bill is not helpful on the problems relating to employer liability on which I initiated an Adjournment debate about six weeks ago. As has already been pointed out, many companies face massive increases in employer liability insurance charges. Some companies have been cut off altogether—

Nick Brown: indicated dissent.

Vincent Cable: The Minister shakes his head, but surveys undertaken by chambers of commerce show that about one in eight or one in 10 companies face difficulties in getting any liability cover at all.

Nick Brown: That is an important point and I should be grateful if the hon. Gentleman would drop me a note listing companies that to his certain knowledge are wholly uninsurable. My understanding is that the problem relates to rates for insurance rather than its availability.

Vincent Cable: My impression is that both are involved, although I shall be happy to correspond with the Minister and send him the record of my debate where I made relevant references.

Mark Hoban: Is the hon. Gentleman saying that there are problems both with the rates charged for cover and because insurance companies are withdrawing capacity for employers' liability insurance from the market?

Vincent Cable: That is my point. Employers liability cover is not being withdrawn maliciously; it has been withdrawn because the market cannot fulfil it in certain sectors, such as quarries, for example, where the safety factor is especially difficult to cover. Although the Minister disputes whether this is a serious issue—it is—I can envisage difficulties with the Bill because companies would be open to fines and workers could be dismissed even though they cannot obtain satisfactory insurance. That is not satisfactory.

Nick Brown: I do not dispute the fact that that is a serious issue, but I am trying to get the hon. Gentleman to say whether the problem relates to the absolute unavailability of insurance or to the increased premiums. In other words, the problem is that insurance is available, but at a much higher rate.

Vincent Cable: I shall happily guide the Minister to the surveys that have been carried out, I think, by an amalgamation of chambers of commerce.

Henry Bellingham: It is not just a question of the premiums going up very sharply; a number of companies have had to restrict greatly the categories of business that they continue to conduct. For example, a small specialist construction firm on the south coast requires £5 million of cover to secure contracts from its regular customers, but it has been able to secure only £1 million of cover this year at a cost of £8,000, whereas £12,000 bought £10 million of cover last year. That specialist company is now contracting out work and getting rid of employees. It is facing a crisis, as are many other companies.

Vincent Cable: That is an accurate description of what is happening. I know that the Minister is supervising an inquiry in his Department, which is very welcome, and which is due to report very soon, perhaps in March. I hope that, when that report is available, we shall be provided with a good analysis of the problem, why it has arisen and the best way to deal with it. Perhaps then the Bill will be seen to be helpful, but I think that the problems lie elsewhere.
	The conduct of the insurance industry itself should be considered. Despite the fact that the life insurance industry is in terrible trouble, normal commercial insurance is currently rather profitable. It is worth considering how the insurance companies have dealt with their clients, because that has caused a good deal of hardship and disruption.
	As has already been mentioned, "no win, no fee" litigation is also imposing costs. That is partly an issue for the Government because of the way in which the Lord Chancellor's Department, in effect, sets the compensation tariff. That interlocking series of policy issues must be addressed. I am not sure whether the Bill is helpful, but we need to wait for the outcome of the Minister's inquiry before we decide what is the most productive way forward.
	I should be happy to support bits of the Bill, but I am less happy with other provisions. However, at least we would benefit from considering the Bill in Committee to find out how it could be augmented and improved.

Henry Bellingham: I certainly congratulate the hon. Member for Scarborough and Whitby (Lawrie Quinn) on introducing the Bill, which he has obviously put a great deal of thought and effort into. I am a retread, and those of us who have been involved with previous private Members' Bills know only too well that they require a great deal of effort and a huge of amount of consultation with different organisations and bodies. There is no question but that the hon. Gentleman has put a lot of work into the Bill.
	It is a great pity that the Company Directors' Performance and Compensation Bill was not given a proper debate. It is bizarre that a rather scurrilous, squalid attempt was made to scupper that Bill, which, I am afraid, succeeded. I do not understand the motives for that.

Mr. Deputy Speaker: Order. We are now considering this Bill, and the hon. Gentleman ought to deal with it.

Henry Bellingham: Of course I will, Mr. Deputy Speaker, but it is very important to put the Bill into context. If the other Bill had not been scuppered, we would still be discussing it. I wish to make it clear that that was not the fault of the hon. Member for Scarborough and Whitby; he is a very genuine, honest person, and I am sure that he had nothing whatever to do with what happened.

John Bercow: Decent.

Henry Bellingham: He is a decent person, as my hon. Friend the Member for Buckingham (Mr. Bercow) rightly points out.
	All that is history, but I am sure that there will be various post-mortems into what happened, and I hope that my hon. Friend the Member for Tunbridge Wells (Mr. Norman) is given a change at some stage to reintroduce his Bill.
	The wider economy forms the background to the Bill, because no Bill that affects businesses, particularly small and medium-sized businesses, can be judged without taking a very close look at it. There is no doubt in my mind that the current macro-economy is starting to stall as part of the global slowdown: we need only look at the way that stock markets have reacted in the past 11 days or so. Very serious concerns exist about the fragile nature of our economy and we must examine the Bill in that context. As my hon. Friend the Member for Fareham (Mr. Hoban) has made clear, the Bill will have regulatory implications. All businesses, large and small, are very concerned about the forthcoming national insurance increases, which will take place in the spring, around the time that this Bill would be introduced. The avalanche of red tape and bureaucracy that is piling down on businesses is having the biggest impact on corporate Britain at the moment.
	We all know that a framework of health and safety legislation is needed. It is interesting, however, that while in the United States every effort is being made to combat the fall in consumer confidence and in stock markets by examining measures to reduce regulatory burdens and to cut taxes, Britain and the EU appear to be going in the opposite direction. What is unfortunate is that the UK supply side economy was previously the envy of Europe. In terms of burdens on business, our regime was probably the most sensibly balanced anywhere in Europe and, consequently, we attracted a great deal of inward investment. Obviously, that was important to small firms. That was why, in the opinion of many pundits and experts, this country has done so well over the past few years. We had an excellent supply side, and a Chancellor who, until recently, had control of public finances. We had flourishing small firms and a light regulatory touch that was very much part of the reforms introduced by the previous Government.
	As for red tape and burdens on business, taken individually, they are not showstoppers or deal breakers, but the drip, drip, drip—the accumulated impact—of those burdens is starting to have an effect. Some of those burdens on business are manifestly home-grown. The Employment Relations Act 1999 has led to a flurry of statutory instruments; indeed, I was involved in considering one of those—the regulations on maternity, paternity and adoption—the other day in Committee. Compliance with such regulations is fine for bigger organisations—firms such as ICI or SmithKline Beecham—which have large human resources departments. However, a small company, which will also be impacted by the Bill—

Mr. Deputy Speaker: Order. I am prepared to allow a certain degree of reference to background in a Second Reading debate, but the hon. Gentleman should relate his remarks to the Bill fairly soon.

Nick Brown: Further to that point of order, Mr. Deputy Speaker—

Mr. Deputy Speaker: Order. It was not a point of order. I was simply putting the hon. Gentleman on the right track.

Nick Brown: On a point of order, Mr. Deputy Speaker, would it be right for me to point out to the House that the Bill does not alter the regulations imposed on business at all? It relates to the penalty regime.

Mr. Deputy Speaker: That is not a point of order for the Chair but more a matter for debate. The right hon. Gentleman has made the point.

Henry Bellingham: When examining the overall framework of burdens on business, we must consider what businesses must do when things go wrong. There is no question but that parts of this Bill, although it is well-intentioned, will lead to more paperwork. The hon. Member for Scarborough and Whitby wants to encourage best practice, in which we support him, but is he not using a sledgehammer to crack a nut?

Lawrie Quinn: I accept what the hon. Gentleman says about the cost of regulation to business, but what is his assessment of the cost to the British economy of the 28,000 serious accidents and 300 fatalities that happen at work each year? Would not it be very good for business to bring down that burden? Would not that help the economy?

Henry Bellingham: It is right for business to tackle that problem, but the hon. Gentleman is talking about the very small percentage of companies that follow worst practice. The overwhelming majority of our companies have best practice in place and do not have problems in the workplace. Their accident record is excellent.

Lawrie Quinn: The hon. Gentleman commended me for the research that I have done. I note from my documents that accidents at work cost British business between £11 billion and £18 billion each year—that is equivalent to between 2 and 3 per cent. of GDP. To bear down on that burden and prevent injuries must be a sensible target for the House to aim at.

Henry Bellingham: I quite agree, and that is why it is important that the Bill goes to Committee, but it is also important to consider what businesses and business organisations such as the CBI, the Institute of Directors and the Federation of Small Businesses have to say about it. The hon. Gentleman mentioned that he had talked to the FSB in his region, but the federation nationally, although it understands the aims of the Bill, is concerned that aspects of it will bear down harshly on businesses that make what could be simply a one-off mistake, and perhaps close them down.

Mark Hoban: My hon. Friend has painted a clear picture of the burden of regulation on small businesses. Does he agree that the sheer rate and volume of regulation, and regulatory changes, make it difficult for business to keep in touch with what is happening, so there is a great risk of inadvertent breach of the rules, for which people could even be liable to imprisonment?

Henry Bellingham: That is a fair point. Again, my hon. Friend shows prescience, because I will come to that in a moment.
	The average small business man now spends up to 14 hours a week dealing with paperwork and form filling. Many businesses have taken years to build up, and many have been passed down the generations, and the law of unintended consequences following the enactment of the Bill could mean the end for them. That is what I am extremely anxious to avoid.

John Bercow: My hon. Friend is developing his arguments in his usual measured way. Does he accept that it is important not to compromise the Conservative commitment to, or record on, health and safety at work, a useful adumbrated summary of which can be found in that excellent tome "Conservative Social and Industrial Reform" edited by Mr. Charles Bellairs?

Henry Bellingham: I expect that there will be snow on the ground and little to do outside this weekend, so I will follow my hon. Friend's advice and go home equipped with that volume to study. He is absolutely right, because the whole thrust of our policy is not to bear down on existing health and safety legislation but to reconsider some of the other burdens on business. I am sure that he will agree that we do not want to make the health and safety regime any harsher, as we probably have the right balance in place for business, employees and the wider public who may have contractual relations with businesses and could be the victims of injuries.

John Bercow: I assure my hon. Friend that there need be no disharmony between us on this or any other matter. Does he agree that it is also important to establish clarity as we contemplate legislation? In that context, what assessment has he made of paragraph 12 on page 2 of the explanatory notes, in which reference is made to the intended replacement of the current maximum fine of £2,500 "for each day prosecuted" with a maximum fine of £20,000? Could not the significance of the words "for each day prosecuted" be very great for an accidentally errant firm?

Henry Bellingham: I spotted that as well. Again, my hon. Friend shows prescience because I shall come in a moment to the issue of fines and the threat of prison sentences. First, however, I want to flag up one further set of regulations that have arisen from the Government's legislation, which I would describe as home-grown red tape. I refer to the flexible contracts regime. Although a larger corporation could cater for and cope with that, a small contracting business of perhaps 10 employees—a firm with an excellent record of avoiding accidents, which implements a regime that goes far beyond that proposed in the Bill—could, albeit in extraordinary circumstances, become involved in some accident and, as a consequence, suffer a heavy fine. Such small firms might find it difficult to cope with demand for flexible contracts. That is another reason why we feel strongly that the Government have gone too far on the supply side of the economy. Moreover, a great deal of legislation has arisen as a result of the social chapter, to which the Government signed up when they first came into power—

Mr. Deputy Speaker: Order. I am afraid that the hon. Gentleman is again straying wide of the mark.

Henry Bellingham: I am grateful for your advice, Mr. Deputy Speaker.
	Page 5 of the Bill makes it clear that the social chapter is relevant, but I shall not push my luck with you. I merely point out that the sort of firms that the Bill would catch will be affected by the agency workers directive and the equal treatment directive. Such directives are coming down the track at an alarming rate and will hit corporate Britain very hard.

John Bercow: I do not want to go down the wrong path any more than my hon. Friend wanted to do so. We all take note of your exhortations in these circumstances, Mr. Deputy Speaker, but does my hon. Friend recall that the working time directive—I shall relate that directly to this important Bill—was justified at the time of its introduction by many of our European Union partners by reference to health and safety considerations, which, as all hon. Members present know, are subject to qualified majority voting? Is it not pertinent to ask the hon. Member for Scarborough and Whitby (Lawrie Quinn)—or through you, Mr. Deputy Speaker, the Minister for Work—whether the Bill's provisions would, at European level, be subject to majority voting under the social chapter? That is relevant when considering whether we should take this measure further and into Committee.

Henry Bellingham: I agree with my hon. Friend; the Bill needs to go into Committee and be discussed in more detail.
	Perhaps even two years ago, before various additional burdens were imposed as a result of the social chapter, one might have said that businesses could easily live with this legislation. We should consider the Bill in the context of legislation that might not immediately impose regulatory burdens on business but could do so if things started to go wrong. That is the background of today's businesses. There is serious wealth destruction in the small firms sector, which is why the Government have said that the key test that they will apply to any new measure is whether it will hit wealth creation. Perhaps that is why this is not a Government Bill, but the Government have instead chosen to rely on a Back Bencher to promote the Bill as a handout.
	I have explored the wider business context, which is important. Although you, Mr. Deputy Speaker, were slightly irked when I strayed a bit too widely on two occasions, which is understandable, when a Bill affects business it is incumbent on hon. Members to examine the wider business context in which the Bill is to operate.
	My hon. Friend the Member for Fareham talked about the compensation culture, which appears to have got completely out of control in this country, and he rightly mentioned the crisis in public liability insurance. Employer and public liability insurance premiums have gone through the roof. Although we are pleased to see him here, I was slightly concerned when the Minister for Work said that his report would come out in late spring or early summer, because the crisis is happening now. I shall remind the House of the two cases that I mentioned earlier, because they are not one-off cases. I have been in close contact with the Federation of Small Businesses, the Forum of Private Business and several other organisations that have been feeding me and other hon. Members horror stories about what is happening.
	A small specialist construction firm on the south coast requires insurance cover of £5 million to secure contracts from its regular customers. This year, that business was able to secure cover of only £1 million at a cost of £8,000, whereas last year £12,000 bought cover for £10 million. As we speak, the firm, which is in the specialist contract hire business, is getting rid of employees and restructuring its business entirely. It has had to tell a number of its key customers, "Sorry, but we cannot trade with you."
	That is a classic example of a firm that has faced an extremely difficult choice: whether to continue to serve the customers that it has successfully served for many years, or to tell those customers that because it cannot get insurance, it is having to get rid of staff and turn away business. Many firms have taken the first option and are now trading illegally, which is extremely unfortunate and we cannot condone it.

Mark Hoban: Let me take my hon. Friend back to a point that our hon. Friend the Member for Buckingham (Mr. Bercow) took from the explanatory notes about the fines that businesses might face if they do not have employers' liability insurance. Does he agree with my interpretation of paragraph 12, which is that the current maximum fine of £2,500 per day is to be replaced by a maximum fine of £20,000? Under the current regime, if a firm were found to have traded without insurance for 10 days, it would be fined £25,000, but under the regime proposed in the Bill, such a firm would be fined only £20,000. Does that not seem rather perverse?

Henry Bellingham: It does seem perverse, and it is something that I picked up on. Perhaps the Bill's promoter would like to comment.

Lawrie Quinn: I am sure that the hon. Member for Fareham (Mr. Hoban) realises that the provision is simply a toolbox that is available for judges to use.

Henry Bellingham: I am grateful to the hon. Gentleman for clarifying that point.

Mark Hoban: I am sorry to intervene on my hon. Friend again, but the explanatory notes state clearly that the current maximum fine of £2,500 for each day prosecuted is being replaced with a maximum fine of £20,000. Therefore, we are dealing not with a toolbox but with a change in the legislation that reduces the number of tools available to the judge in such cases.

Henry Bellingham: Indeed, and I am grateful to my hon. Friend for picking up that point. The measure is perverse because, on the one hand, it will create a much tougher and more onerous regime that includes the possibility of imprisonment, and on the other hand, whereas it is currently possible in some of the more extreme cases to mete out a tougher fine, the Bill raises the possibility of the court only being able to mete out a less tough fine. That strikes me as perverse.

John Bercow: The purpose of these exchanges is to clarify and not to obfuscate. Does my hon. Friend agree that it would be genuinely helpful if the hon. Member for Scarborough and Whitby (Lawrie Quinn) could clarify that point? From my point of view, the fog has intensified, and the reference to the toolbox has served not to illuminate, but to obscure.

Henry Bellingham: I do not doubt that the toolbox of the hon. Member for Scarborough and Whitby is full of kit, and when Opposition Members have finished speaking perhaps he could wrap up some of these points and put that toolbox to good use.
	I return to the crisis that we are facing as regards small firms and insurance premiums. I mentioned a steel fabrication business in the Deputy Prime Minister's constituency, which has been forced to make five people redundant. As we speak, it may well be looking at the possibility of ceasing to trade, because its combined public liability and employers liability insurance bill has increased from £3,600 to £28,000. I hope that the Deputy Prime Minister will visit that firm and explain to those who work there why this crisis has taken place, because every organisation that I have spoken to is very concerned about the problems faced by the small firms sector—especially the heavier, more specialist end of the construction sector.
	I quoted remarks that the Minister with responsibility for small business, the hon. Member for Edinburgh, South (Nigel Griffiths), made on 5 December, when he said that the Government were concerned about the matter and would take action. He said that the Treasury had put in place a report; the Department for Work and Pensions was conducting an inquiry; the Office of Fair Trading was looking at the matter; and an independent report was being prepared. Let me remind the Minister for Work that there is a crisis right now. Members of the Federation of Small Businesses have told me in no uncertain terms that they do not want reports in the spring or early summer; they want action now, because many of those firms will not last until the spring or early summer. Is there any possibility of those reports being consolidated? I do not understand why we need four. The Minister is known for his strong leadership and the way in which he gripped, for example, the foot and mouth crisis. Perhaps he could grip this crisis too, consolidate those four reports and, in a matter of weeks rather than months, come up with a definitive statement on what is needed.
	I mentioned that the Bill was ill-timed and premature, because those four reports are in the preparation pool. We want the Bill to pass into Committee, but it is premature for the Government to come forward with what is basically a Government Bill with the help of a Back-Bench Member, at a time of huge uncertainty and when there is the prospect of the reports being published in the near future.
	I also said that the Bill was draconian. Raising the fine to such a level does not make sense; nor does creating the option of prison for health and safety offences in the lower and higher courts. When prisons are full to bursting point, do we really need to imprison small business men and women—company directors—who have committed offences of this nature? I would question that. We may well want to fine them. We might want to strike them off and prevent them from being company directors again. There may be other measures that would deter such offences. However, prison is needed to harbour dangerous criminals and to act as a deterrent to prevent very serious crime.

John Bercow: I strongly agree with the point that my hon. Friend is making. Does he accept not only that it would be inappropriate to impose custodial sentences, but that such a provision would exacerbate the phenomenon of prison overcrowding, the effect of which is to undermine rehabilitation programmes in prison for persistent offenders? The Government are supposed to be committed to such programmes, but the Bill's casual drafting imperils that important objective.

Henry Bellingham: I agree that it is casual drafting and it sparks off an anti-business streak, which I find very distasteful. We all know that the overwhelming majority of small business men and women work incredibly hard in difficult conditions. They employ a large number of people, perhaps 35 per cent. of the entire work force. As a result of the Bill, the prospect of prison would hang over a percentage—albeit a very small percentage—of those who commit offences. Employers who follow worst practice or have been personally responsible for serious injuries and accidents occurring certainly need help, but they also need to be prevented from going back into business. Ironically, the Bill would mean that they could go to prison for six weeks, come out and carry on exactly as before. There is no provision in the Bill for having them struck off so that they cannot become company directors again, and can be prevented from owning a business.
	The Minister is on record as saying in a debate only two or three months ago, when we discussed corporate manslaughter, that there is a huge amount of uncertainty in respect of the Government's attitude to corporate manslaughter and we need clarification. It cannot be right to introduce a Bill that imprisons business men at a time when the Government are conducting another review. When I intervened on the hon. Member for Twickenham (Dr. Cable), who has now left the Chamber, probably to have a bowl of soup before returning to his constituency, I asked him about the HSE report on the Potters Bar rail crash. Although an interim report has been produced, we are still awaiting the final report on that crash, which took place in May 2002. Constituents of mine who were injured on that train are extremely concerned about the time that report is taking.
	Another reason why it is premature to introduce this Bill now is that the Government are looking at all aspects of corporate manslaughter. Perhaps the Minister will comment on that if he has time to reply to the debate.
	I have troubled the House for half an hour and I know that others are waiting to speak, so I shall conclude my speech. I congratulate the hon. Member for Scarborough and Whitby on the work and effort that he has put into the Bill. He has obviously made a great effort to talk to many different business organisations. Not all of them are completely on side or in favour of what he is trying to do; they are concerned, for various reasons, including the overwhelming reason, which is that small and medium enterprises face a crisis as a result of insurance premium hikes. Until that crisis can be resolved, or examined by the Government in a systematic and comprehensive way, it would be premature to move any Bill quickly into law. I hope the Minister will comment on that. I wish the hon. Member for Scarborough and Whitby well and hope that the Bill goes into Committee, there is proper debate on it and that the good parts of it become law.

Eric Forth: One cannot but feel a lot of sympathy for the hon. Member for Scarborough and Whitby (Lawrie Quinn). I have no doubt that the history is fairly clear. Here was an innocent little Government handout Bill designed to tidy, as the Government saw it, a small part of the health and safety world. They found a ready, willing and dedicated—

Ian Stewart: And able.

Eric Forth: Indeed, and an able person in the shape of the promoter. When he saw the running order for today, I am sure that he felt rather confident that this measure would slip quietly through the House with barely a ripple, as is often the hope on the Labour Benches.
	Our sympathy for the hon. Gentleman stems from the fact that he has run into one of these occasions when, happily, a Friday springs surprises. Parliamentary Fridays are a delight to us dedicated fans and anoraks, as almost anything can happen, and today almost anything has. Indeed, almost anything may still happen—I would not be at all surprised. My hon. Friend the Member for Buckingham (Mr. Bercow) put his finger on it. We all witnessed a quite disgraceful little episode. The hon. Member for Scarborough and Whitby was seeking to explain in a full, calm, dedicated and passionate way what the Bill meant to him and his constituents, but he was bullied by the hon. Member for Hendon (Mr. Dismore), who was selfishly looking at his rather pathetic little Bill further down the Order Paper and seeking to truncate the hon. Gentleman's speech persuading the House about the Bill. Even before the debate started and we got into our stride, we were denied a full explanation of the Bill's contents by its promoter because of the behaviour of the hon. Member for Hendon, whose Bill does not have a hope in hell.

Mark Hoban: May I draw my right hon. Friend's attention to the Bill's sponsors, who include, ironically, the hon. Member for Hendon (Mr. Dismore)?

Eric Forth: The ironies abound. I have not seen too many of the Bill's other sponsors today. I shall not name names—that would be invidious, even for me—but the hon. Member for Scarborough and Whitby must feel a little lonely as he casts his eye over the acres of green leather, looking in vain for the Bill's sponsors. We can assume that there is not much enthusiasm for the Bill among Government Members, who are not greatly evident by their physical presence and do not appear to be prepared to give the hon. Gentleman any support. We have not heard a word from any of them, and very few are seeking to catch your eye, Mr. Deputy Speaker.
	I am setting the scene, as it is important that we understand the context in which Bills are introduced in the House before we start to analyse them. I hope to dig into the depths of the Bill, but time is short and I do not want to deny my hon. Friends the opportunity to speak, although there is a risk of that.

John Bercow: My right hon. Friend chided Government Members for their failure of collegiality and their failure to support the hon. Member for Scarborough and Whitby (Lawrie Quinn). Does he not think it lamentable and evidence of a lack of esprit de corps that the hon. Gentleman is not supported even by his boss, the Minister of State, Cabinet Office, the hon. Member for Paisley, South (Mr. Alexander)? The hon. Gentleman labours for his boss, but his boss stabs him in the back—what a way to behave!

Eric Forth: I could easily be diverted into making comments about the lack of collegiality among Government Members, but I will not, as I shall do so next Tuesday in the debate on reform of the House of Lords. However, I will not be distracted, even by my hon. Friend, from talking about the Bill.
	We missed some nuggets from the hon. Member for Scarborough and Whitby—I bet that they were in his toolbox—including an analysis of why the Bill would be beneficial. He expressed his hopes, desires and aspirations, and tugged at our heart strings when he talked about his constituents and experience—all good stuff—but what we really wanted was analysis and an international comparison of health and safety in Britain and other countries.
	In the dim and distant past, I had some responsibility for the Health and Safety Executive, as I had the honour of serving in the old Department of Employment between 1990 and 1992. I was proud to make excellent speeches—they were excellent because my civil servants wrote them—praising this country's health and safety record. We therefore have to be careful about saying that because our record is deplorable and disgraceful we have got to tighten the screw, increase fines and perhaps impose more imprisonment. Internationally, a case has not been made for that. There has not been any attempt, either, to address sectoral issues—as we know, the health and safety record varies enormously from one sector to another. If the hon. Member for Scarborough and Whitby had been allowed a bit more time by his hon. Friend the Member for Hendon, who is not even in the Chamber now, he would have been able to develop those arguments. But lacking, as we do, all these arguments, we have to look at the Bill a bit more objectively and conduct our own analysis of it.
	For example, the simple raising of fines is assumed to be some sort of beneficial mechanism, and is assumed to have a deterrent effect. I am not sure that the case is self-evident. We have to consider who pays the fines. If we look at the hierarchical structure in the construction industry, for example, and in many others as well, we see that the people who deliver health and safety in a meaningful sense are relatively low in the hierarchy, if I am allowed to speak in such incorrect terms these days—people who do real jobs on the construction site and have a real involvement in health and safety. However, it is almost certainly someone else who will end up paying the fines. There is the danger of a disconnect between those who will suffer the penalty—the increased penalty, if the Bill goes through—and those who have the real responsibility for delivering health and safety.

George Osborne: There is a question about the effectiveness of fines. A National Audit Office study—I see the Chairman of the Public Accounts Committee sitting next to my right hon. Friend—found that 40 per cent. of fines levied by courts are never collected, so it is legitimate to question whether fines are an effective mechanism in the criminal justice system.

Eric Forth: I am grateful to my hon. Friend. That is an extremely relevant point. There is a glib assumption that if we increase the rate of fines, people will have their minds concentrated, they will do what we want them to do, and that will be the end of the matter.

John Bercow: rose—

Edward Leigh: rose—

Eric Forth: Before I give way to my hon. Friends—my hon. Friend the Member for Gainsborough (Mr. Leigh) in particular may have something to add—I should finish the point.
	The hon. Member for Scarborough and Whitby made a passing reference to conviction rates in his abbreviated opening speech, which his hon. Friend the Member for Hendon did not allow him to complete. That was an important point, but it was not developed. Related to the question of whether fines are ever collected, there is the prior matter of whether convictions are obtained for the offences outlined at some length in the Bill. If convictions are not obtained and fines are not collected, I fail to see how a case can be made for the provisions in the Bill.

John Bercow: What my right hon. Friend says about conviction is of the essence, but, notwithstanding the intervention of my hon. Friend the Member for Tatton (Mr. Osborne), is it not possible—indeed, likely—that the promoter has taken account of the possible ineffectiveness of the fines regime by providing the backstop power of imprisonment? If my right hon. Friend is prepared to concede that that backstop power is available, is it not incumbent on the hon. Member for Scarborough and Whitby to assure us that there is honesty in sentencing, and that imprisonment would apply without causing the overcrowding that I and others fear?

Eric Forth: I was about to come to that. By my count, there are 13 additional imprisonable offences outlined in the Bill. That is a considerable broadening of the number of possibilities for imprisonment, yet the explanatory notes—always a rich seam of information on such Bills—imply the contrary in paragraph 17. I suspect that the promoter will want to deny authorship once he hears what I have to say.
	The Minister boasted that his Department had written the explanatory notes. That is an oddity, for a start. Here we are on a Friday, allegedly discussing private Members' Bills—in this case a Bill sponsored by private Members, most of whom are not present—yet the explanatory notes are written by the Department. That gives us a clue as to what is really going on.
	In the inadequate explanatory notes that the promoter did not write, we read—this follows directly from the point just made by my hon. Friend the Member for Buckingham:
	"Making imprisonment available for more health and safety offences is expected to lead to a minimal increase in the prison population."
	How does the Department know that? That is the first question that we have to ask. Imprisonment is a matter for the courts. How can even a Minister, who obviously drafted the notes on a rather bad day, know what the effect is likely to be? Furthermore, if it is so minimal, why are we bothering with it? We are caught in a paradox. It is one thing to argue that the provision will be phenomenonally successful and that lots of people will be banged up for health and safety offences, but we are being told that hardly anybody will be imprisoned. That hardly makes it sound as though the measure will be effective.

Edward Leigh: I must put the intervention of my hon. Friend the Member for Tatton (Mr. Osborne) into context. It is true that only about half the fines are paid, but that will not be the problem in this case—these are business men and they will pay their fines. Although very few would go to prison, the threat would still be in place. I return to the point that I made in an earlier intervention: the provision will place undue burdens on business, which is continually told by numerous consultants that it must do this or that. That often affects small businesses in particular. These are new regulatory burdens that would add to the burden on business.

Eric Forth: My hon. Friend has got ahead of me slightly. In a moment, I shall deal with paragraph 19 of the explanatory notes, which touches on the very matter to which he refers.
	However, I have not yet finished with paragraph 17. We are aware of the paradox about whether more people will go to prison and of the points that my hon. Friend the Member for Buckingham has made more than once regarding the possible effect on prisons, but, intriguingly, the paragraph goes on to state:
	"Making two offences which are triable only in the lower courts into 'either way' offences (triable in the lower or the higher courts), could lead to a few additional cases being heard in the higher courts."
	That tells us that the courts, which are already under enormous pressure, will be under more pressure as a result of the Bill.
	Assuming that we believe what is set out in the explanatory notes to be true, we can begin to see the cumulative effects of what might happen. The courts will be doing more work, more people will be going to prison and more fines will be imposed, although they probably will not be collected. Yet the whole emphasis of the notes is to say, "Don't worry folks; not much will really happen." Until the Minister gets to his feet or seeks to catch your eye, Mr. Deputy Speaker, we will be in a complete fog about what is in his mind and his intentions, although they are not really his intentions, because this is not really his Bill. In fact, therefore, he will have to guess what was in the promoter's mind in drafting the Bill.
	On paragraph 18—

Mark Hoban: Before my right hon. Friend moves on, I should like to draw his attention to a statement at the end of paragraph 17:
	"The public sector is generally exempt from the 1969 Act."
	We are being told that the legislation would hit the private sector, but not the public sector.

Eric Forth: I hope that that is not true. Again, we might hope for clarification from the promoter or the Minister in that regard. It would be very odd if it were true, given that the Government seem hellbent on renationalising large sectors of our economy, which presumably means that the public sector will expand into some of the very areas in respect of which we should be most concerned about health and safety. That is another lacuna that requires explanation.
	I shall not dwell on that point, however, because I am very eager to get on to some other aspects of the explanatory notes that have caught my eye. Paragraph 18 states:
	"The Bill will have no significant manpower implications for the Health and Safety Executive".
	Why not? If the provisions are going to make everything more effective, might not more people be needed? [Interruption.] We are all welcoming the hon. Member for Dismore back into the Chamber—[Laughter.] I apologise, I meant to say Hendon. Perhaps the hon. Member for Hendon is going to bully his hon. Friend the Member for Scarborough and Whitby yet again, as he is sitting rather threateningly behind him. I hope that he will not try to prevent his hon. Friend from making a winding-up speech. When the time comes for the winding-up speeches, after my hon. Friends and the Minister have spoken, and when I have completed my remarks, we may see whether the hon. Member for Hendon is able to prevent his hon. Friend from winding up the debate. I hope that he does not do so.

John Bercow: My right hon. Friend read out to the House only part of paragraph 18. He told us that the Bill would have no significant manpower implications for the Health and Safety Executive, but I am sure that he was about to point out that it will also have no significant manpower implications for the criminal justice system. How is that compatible with paragraph 8, which advises us that
	"At present, imprisonment is an option only in certain cases. The Bill will make imprisonment available for most health and safety offences."
	Is not there a problem of the right hand not knowing what the left hand is doing?

Eric Forth: My hon. Friend is rightly famed for his ability to think of many things at once. I can think of only one at once. I therefore had to consider the paragraphs seriatim rather than at the same time. I was talking about the Health and Safety Executive; I shall briefly comment on the criminal justice system later.
	Throughout the explanatory notes, the arguments appear to be "on the one hand, on the other hand." For example, the Bill provides for more fines, but they probably will not be collected. Under the measure, not many more people will go to prison, yet it is supposed to be a deterrent. We are told that although a significant improvement in health and safety will ensue, not many more people will work for the HSE.
	It has been admitted that additional cases are expected in the higher courts. That means delays in other cases in the higher courts. That is another unintended consequence of the Bill. Neither the promoter nor the Minister foresaw it.
	We have finished the starters, so let us get on to the main course. Paragraph 19 of the explanatory notes states:
	"The Bill will not impose new requirements on business."
	That is unbelievable. If there is any hope of the Bill making a material improvement in health and safety in the workplace, how can it not impose new requirements on business? The statement is ridiculous and frankly untrue. Paragraph 19 continues:
	"A Regulatory Impact Assessment is not, therefore, required."
	How do people know that the measure will not impose new requirements if they have not attempted to make an impact assessment?
	The more I read the explanatory notes, the more I believe that we should know the identity of the author. Is it the Minister? When he winds up the debate, I hope that he will admit authorship. I hope that the promoter does not want to claim authorship, given the inconsistencies.
	The statement in paragraph 19 that the Bill will not impose new requirements cannot be true. The annexe to the explanatory notes sets out matters that may be subject to fines and so on. They include a
	"duty not to interfere with or misuse things provided for health and safety."
	Those who have such a duty will have to put in place procedures and possibly additional manpower to ensure that they can adhere properly to such requirements or go to prison. Another item in the annexe reads:
	"Contravening any requirement imposed by an inspector under section 20 (eg. to give information . . . or to leave premises undisturbed after an incident)".
	The requirements are proper. It is implied that if they are not being fulfilled now, the new regime of fines and potential imprisonment will mean that people adhere to them more closely in future. How can that be done without additional burdens on business? My hon. Friend the Member for North-West Norfolk (Mr. Bellingham) rightly drew attention to that.

Henry Bellingham: The specialist contractor in the Deputy Prime Minister's constituency whose insurance premium is going through the roof will have to appoint expensive consultants to advise him on the Bill. It will probably result in a thick wad of paper that requires many ticks in many boxes. That will surely have a regulatory impact. I am at a loss to understand why the explanatory notes state that no regulatory impact assessment is required. That makes no sense.

Eric Forth: If my hon. Friend, whose expertise in such matters is legendary, cannot understand it, then what hope have I of understanding it? That is my difficulty.
	I want to break off from my brief and superficial analysis of that part of the Bill and get stuck into the second part. We all know that the health and safety aspect is vital, as the promoter so eloquently set out—

Mr. Deputy Speaker: Order.
	It being half-past Two o'clock, the debate stood adjourned.
	Debate to be resumed on Friday 7 February.

Remaining Private Members' Bills
	 — 
	CROWN EMPLOYMENT (NATIONALITY) BILL

Order for Second Reading read.

Hon. Members: Object.
	Second Reading deferred till Friday 7 February.

ANTI-SEMITISM (ARAB WORLD)

Motion made, and Question proposed, That this House do now adjourn.—[Joan Ryan.]

Louise Ellman: I issue a wake-up call to those who ignore the growth of pernicious anti-Semitism in the Arab world. In doing so, I wish to expose a case of double standards.
	The tragic Israeli-Palestinian conflict does not justify mainstream Arab media and politicians merging long-standing religious pseudo-scientific and political anti-Semitism with demonic images of what they call the "Zionist entity." That is then transferred to Jews as a whole, wherever they may be. Zionism is the national self-determination of the Jewish people in the state of Israel. It encompasses a wide range of religious and political perspectives. Criticising the Israeli Government is not intrinsically anti-Semitic. I deplore the occupation. I have long supported the need for a Palestinian state alongside Israel. I despair at this week's victory for Ariel Sharon and the defeat of Amram Mitzna. But when Arab media demonise Israel and Jews in the language of the Third Reich, alarm bells ring. They ring particularly when Arab official spokespersons either repeat those utterances or clearly support what is said in state-sponsored media.
	Holocaust denial is officially promoted in many Arab countries and communities. Seif Ali al-Jarwan, writing in the Palestinian newspaper Al Hajar Al-Jadeeda in 1998, is one example of that. The article mocked pictures of Jews pushed into the gas chambers as
	"a malicious fabrication 'by Shylock-like' greedy, cunning, evil and despised Jews".
	In April 2002, Al Akhbar, the Egyptian Government-controlled and supported daily newspaper, called the holocaust
	"a huge Israeli plot aimed at extorting the German government and European countries."
	"Mein Kampf" and the "Protocols of the Elders of Zion" are near the top of the bestsellers list in Cairo, Beirut, Damascas, Gaza and Ramallah. As part of its 2002 Ramadan celebration, Egyptian television has just shown the 40-part epic "Horseman without a Horse", based on the infamous forgery the "Protocols of the Elders of Zion", proclaiming a Jewish plot to take over the world as if it were historical fact.
	Blood libels are regularly repeated. An article in Al Akhbar last year announced that the Jewish
	"Talmud determines that the matzos of atonement must be kneaded with blood from non Jews, the preference is for the blood of youths after raping them."
	The Saudi Government daily, Al Riyadh, published another article in March 2002, in which Dr. Umayma Ahmed al-Jalahma stated:
	"the Jews spilling human blood to prepare pastry for their holidays is a well established fact, historically and legally, all throughout history. This was one of the main reasons for the persecution and exile that were their lot in Europe and Asia".
	However, these statements are not confined to the Arab media, or even to the media supported by the Governments of the countries concerned; they are also made by Ministers and people in senior positions in those countries. For example, in his book "Matza of Zion", the Syrian defence Minister Mustafa Tias says:
	"The Jew can kill you and take your blood in order to make your Zionist bread."
	The same Minister told a visiting delegation from the Royal College of Defence Studies last October that Israel was responsible for the attack on the twin towers in New York—a view that is widespread in the Arab and Muslim world.
	Blatant theological anti-Semitism was clearly alive when no less than the current President of Syria, Bashar al Asad, welcomed Pope John Paul II to Damascus in May 2001 with these chilling words:
	"They"—
	the Israelis and Jews—
	"try to kill all the principles of divine faiths with the same mentality of betraying Jesus and torturing Him in the same way they tried to commit treachery against the Prophet Muhammad."
	Not to be outdone, the London-based Saudi daily, Al Sharq Al-Awsat, recently published an article by Yasser Arafat's aide, Bassam Abu Sharif, charging Jews with
	"nailing Jesus to the cross."
	The examples of theological anti-Semitism are numerous and frightening, and I have merely touched on them in the few references that I am able to make in the time allowed.
	Last year, the Iranian Government felt able to reject the appointment of David Reddaway as the new British ambassador on the spurious grounds that he was a spy and a Jew. Despite the fact that the Leader of the House informed me in this House that David Reddaway was an excellent diplomat and a fine candidate for that position, it appears that Iran was able to get away with that action—to dictate to this country who will be our ambassador and to dispense with an excellent diplomat—on the spurious ground that he was a spy and a Jew.
	From its charter, Hamas teaches Palestinians that Jews control the world's wealth and mass media, that they caused the French and Russian revolutions, and that they formed the League of Nations to rule the world. It preaches to Palestinian children and students that killing Jews is a religious commandment. Indeed, the teaching of hatred towards Jews is rampant in the Palestinian Authority. It is rampant in the schools and it is rampant on the streets.
	However, these messages are no longer confined to the Arab world. In Pakistan, journalist Daniel Pearl was filmed having his throat cut as he was forced to declare, "I am a Jew". Shamefully, the 2001 United Nations anti-racism conference in Durban was overshadowed by Arabs and supporters distributing pamphlets that featured Adolf Hitler and the following caption:
	"If I had won the war there would be no Palestinian blood lost."
	The caption was accompanied by cartoons of hook-nosed Jews. People who were present at that conference told me that the atmosphere was intimidating and frightening, and unacceptable in this century. The venom and intimidation reached such heights that the conference chair, United Nations human rights commissioner Mary Robinson, declared as an act of solidarity, "I am a Jew".
	The echo of these insidious assaults is even reflected in some of the United Kingdom's liberal media. The front cover of the New Statesman of 14 January 2002 depicted a large Jewish star of David impaled on the Union Jack, above the caption, "A Kosher Conspiracy?" I was dismayed, as well as relieved, when the magazine's apology explained that it had not appreciated the Nazi association that such images would invoke.
	Why do I bring this matter to the attention of the House of Commons and of the public? Because it produces a poisonous cocktail of anti-Semitism and anti-Zionism, laced with the venom of Islamicist jihad. That is an inoculation against peace and could fatally damage the prospects for long-term rapprochement between Israelis and Palestinians. It has an impact in the United Kingdom, where the recent report, "Anti-Semitism on the Streets", produced by the Board of Deputies of British Jews and the Community Security Trust, shows an increase in racial attacks on Jews as a result of the preaching of hate.
	October 2000 was a watershed. In the following 22 months, 78 synagogues were desecrated compared with 22 in a similar period previously. Although the number of racial assaults on individual Jews is still small, it has increased and includes the attempted murder of David Myers in Stamford Hill and attacks on individual Jews in London, Manchester and Birmingham. The activities of al-Muhajiroun, which publicly displays posters in London and Birmingham with the words
	"the final hour will not come until the Muslims kill the Jews",
	have been credited with inciting further attacks on Jews and Jewish institutions.
	The report stated:
	"The largest proportion of anti-Semitic activity, however, is abusive behaviour which, more than any other category reflects the general feelings of those who hate Jews, coming as it does from face-to-face encounters and spontaneous acts. Perhaps more than any other trend this reflects the cumulative effects of biased and/or inaccurate media reporting on the Middle East or the promotion of hatred against the Jews that comes from the Middle East and from radical Islamist groups. The change in the direction from which anti-Semitism now comes is therefore a worrying one."
	The far right has promulgated anti-Semitism for a long time, and is a known enemy. However, there is a new source of anti-Semitism from the Arab world, which is too much ignored. The report notes that one reason for that growth of poisonous anti-Semitism and hatred in Arab countries, which is being repeated in this country, is the failure of anti-racist groups to condemn what is happening. That is shameful.
	When anti-Semitism comes from the political far right, it is almost universally condemned, yet when the same phenomenon occurs in the Arab world, demonising Jews as well as the Jewish state, it is almost ignored. That is a case of double standards. The cancer must be stopped; it is time to speak out.
	I ask the Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for Harlow (Mr. Rammell), to acknowledge the importance of these issues and to make strong representations in his bilateral contacts with the countries and Government institutions involved. The phenomenon that I have described is not a fringe activity; it is mainstream and it is deeply damaging to society. The Government should make it clear that the demonising of Jews, whatever its source, is not acceptable, whether it is found in countries such as Egypt, Syria, Iran, Saudi Arabia, the Palestinian Authority—the embryo Palestinian state—or, indeed, on the streets of this country. Nor should the demonisation of any other group be tolerated. I look to our Government to make a stand.

Bill Rammell: I should certainly like to take this opportunity to congratulate my hon. Friend the Member for Liverpool, Riverside (Mrs. Ellman) on raising this serious and important subject and on the way in which she has articulated her case. This subject is important not only in the United Kingdom, but in the wider world.
	The Government's approach to anti-Semitism in the Arab world is in line with our policy of tolerance to people of all faiths, societies and cultures in the United Kingdom. In Britain, we very firmly wish to encourage people of all faiths, cultures and traditions to play a full part in British society. I recognise that, for different reasons, not everyone shares that view of tolerance. I should like to offer the House just a few examples of the actions that the Government have taken to encourage that aim both in Britain and internationally. I shall adopt that approach to assure my hon. Friend about the seriousness with which we view the subject, rather than to make any suggestion that the real and perceived problems to which she refers are resolved, because that is far from the case.
	It is a fact that the Government are vigilant to the threat of rising racism and are committed to tackling anti-Semitism in Britain, wherever it exists. For example, we have taken significant action to tackle anti-Semitism in two ways. First, we have strengthened the criminal law to ensure that the police and courts have effective legislation to deal with those who seek to stir up racial and religious hatred. The Anti-Terrorism, Crime and Security Act 2001 increased the maximum penalty for inciting racial hatred, and that has been widely welcomed. Secondly, by ensuring that the police work closely with the Jewish community, we have sought to reinforce the security of Britain's Jewish communities.
	My hon. Friend referred to the fact that at the very least there has been a perceived increase in anti-Semitic activity in the United Kingdom following the atrocities of 11 September. The Government share her concern about attacks on Jewish people and Jewish property. For example, I am well aware of the strength of feeling especially, but by no means only, in the Jewish community about holocaust denial. I firmly deplore the sentiments expressed by the exponents of holocaust revisionism. Those views are offensive and repugnant, and I do not in any sense underestimate the hurt, offence and distress that they cause. All hon. Members would wish to be associated with saying that strongly and clearly.
	It needs to be said that British Jews have a strong and inspiring history of academic, scientific and cultural achievement. It is particularly important that we celebrate and value the contribution made by the Jewish community in Britain—economically, socially and culturally—to the stability and prosperity of British society as a whole. Certainly, the Government's relations with the Jewish community are extremely important to us, and we will continue to do everything possible to strive to improve them.
	The Government also welcome all moves intended to break down barriers between people—irrespective of whether those barriers are due to religion, faith, race, culture or tradition. We most certainly wish to encourage people of all faiths, cultures and traditions to play a full part in British society. We most certainly view interfaith dialogue as being most important, and we are keen to facilitate that dialogue to ensure that the good relations between faith communities in Britain are maintained and enhanced. Ministers rightly continue to meet representatives of the Jewish and Muslim communities regularly to take that process forward.
	Following those approaches in the United Kingdom—in many senses this is what my hon. Friend was referring to—our activities overseas are consistent with the overall aim of promoting religious tolerance. We certainly condemn all instances where individuals are persecuted because of their faith or belief, and we are committed to tackling anti-Semitism in all its forms.
	Ministers and officials take every opportunity, including with our European Union partners, to urge states to pursue laws and practices that foster tolerance and mutual respect and to protect religious minorities against discrimination, intimidation and attacks. We have sought opportunities to deal with that issue in international forums. For example, the UK co-sponsored a resolution at the United Nations General Assembly in New York in November 2002, to work to eliminate all forms of religious intolerance. We are committed to that aim and we will continue to pursue it.
	Rightly, we also raise regularly specific cases of religious persecution with the Governments concerned, and have done that in cases of persecution against Jewish people and communities in Arab countries. We have done that for other religions in the Arab world, and for Jews in other parts of the world, too. For example, the issue of anti-Semitism in the media in the Arab world was raised in May 2002 during a meeting between Foreign Office officials and leaders of the British Jewish community. Following that meeting, which I feel was important, some of our ambassadors in the middle east were again asked to raise our concerns with the relevant authorities, which happened. I am pleased to say that we were able to report back in generally positive terms on the attitudes of the Governments concerned.
	The attitudes of individual commentators and media outlets, however, continue to cause concern. Many of my hon. Friend's comments referred to that. We take the matter seriously and we continue to monitor the situation closely. She also mentioned the recent publicity surrounding the Egyptian television series "Horseman without a Horse", which was shown in Egypt in November and December 2002. We were concerned about that, and we raised the issue formally in November 2002 with the Egyptian Government, and received an understanding that all the episodes had been reviewed and amendments made to ensure that the programme did not contain anti-Semitic material. That was an important step.
	My hon. Friend also referred to articles of an anti-Semitic nature that have appeared in newspapers in the middle east. One of our actions in response to that, to promote religious tolerance, is to build up links with newspaper editors so that we can maintain a dialogue on this issue. That is particularly important.
	It would be wrong, however, to view the whole Arab world as at variance with our approach on religious tolerance, which a stereotypical view might suggest. In Morocco, for example, official announcements on issues connected with the Jewish community are very different from the stereotyped view. The Moroccan Government are proud of their country's tradition of diversity and value the long and distinguished history of its Jewish people. They rightly take care to draw a distinction between the role of the Moroccan Jewish community and the difficulties experienced in Palestine between Arab and Jewish people. In a warning to radical Muslim fundamentalists over actions against the country's 6,000 Jews, who live in Morocco's main cities, King Mohammed VI said in 2000 that
	"this does not mean we abandon our religious, historical and constitutional duties towards our Jewish subjects".
	He said that in a televised speech, and we welcome such statements and actions.
	My hon. Friend also talked about these concerns within the context of the situation in the middle east. I and the Government are gravely concerned about the situation in the middle east at the moment. There has been too much violence and loss of life, and neither side can achieve lasting security through force. We want to see a complete cessation of all acts of violence, withdrawal of Israeli forces from Palestinian cities, and action by the Palestinian Authority to bring those responsible for terrorist acts to justice, as called for in United Nations Security Council resolution 1435. We played a key role in the adoption of that resolution.
	We continue in our efforts to advance the cause of peace in the region. As will be well known, the Foreign Secretary hosted a meeting on Palestinian reform and nation building on 14 January. Discussion in that meeting was wide-ranging and constructive and recognised the Palestinians' clear commitment to the reform of their institutions. It secured a welcome and clear Palestinian declaration against violence and terrorism and an acceptance that there must be practical action to implement it.
	The participants applauded the work that the Palestinian Authority has done on financial accountability and recognised that the Palestinians need to do more on the judiciary. We warmly welcomed the conference as a significant step forward and see the reform efforts on both sides in the region as consistent with our policy of tolerance to people of all different faiths, societies and cultures.
	My hon. Friend expressed concern about Palestinian school textbooks. There has been concern about the European Union funding of text books with anti-Semitic content for the Palestinians. We have investigated that and concluded that the quotations that are claimed to be taken from Palestinian textbooks have not been found in the new books funded by some EU member states.
	The European Commission has also rightly looked into the allegations and confirmed them to be baseless. European aid is not provided for projects intended to seek to influence internal politics in the Palestinian Authority or Israel. The Commission, rightly again, will always be ready to investigate specific allegations of misappropriation or misuse of funds that it provides. Textbooks provided as part of an EU programme to re-equip Palestinian schools are free from negative content or any content that is likely to incite religious hatred, and are a major improvement on the books that they are replacing. We believe that the Palestinian Authority should be encouraged and supported to complete the replacement of the earlier textbooks as soon as possible.
	My hon. Friend mentioned some detailed concerns about Iran. UK policy in the area mirrors the EU's twin-track approach: encouraging the changes under way in Iran while maintaining pressure to improve Iranian policies that cause us concern. We welcomed the re-election of President Khatami in June 2001 with an increased share of the vote, which demonstrated the Iranian people's clear will for reform and gave him a strong fresh mandate. We hope that he will be able to push through his policies of political and economic reform. It is important that he should do so. We strongly support his stated objective of an Islamic civil society based on the rule of law.
	The resumption of high-level contacts in recent years does not mean that we have forgotten all our concerns about the situation in Iran. We and our EU partners want positive movement by the Iranians in our long-standing areas of concern, and in particular human rights and religious tolerance. Despite some improvements, especially in the area of freedom of expression, we still have major concerns. We shall continue to tackle those through our bilateral contacts and through the EU-Iran dialogue.
	My hon. Friend specifically raised the matter of our ambassador to Iran. The Iranians' decision to reject David Reddaway as ambassador reflected negatively on their attitude to relations with the UK and had an impact on the conduct of our bilateral relations. Following our decision to give the Iranian ambassador in London the same level of access as our chargé in Tehran, there were signs that the Iranians did not want to jeopardise the dialogue that we had started. In response, we proposed another nominee as ambassador, and we are pleased that Iran has agreed to the appointment of Richard Dalton, who took up his post on 1 December. I reject the reported reasons for Iran's rejection of David Reddaway, which we have found to be without foundation.
	We have concerns about the statements on behalf of representatives of the Syrian Government, and we will continue to raise those.
	My hon. Friend has raised serious concerns about this important subject. There are problems of anti-Semitism, religious intolerance and racism throughout the world, and it is crucial that we do everything possible to combat the malign forces. That is certainly something that the British Government are committed to and that the Foreign Office will pursue very actively indeed.
	Question put and agreed to.
	Adjourned accordingly at Three o'clock.